Unlocking the Truth: The Struggles of Today’s Home Mortgage Market

Let’s talk about something that affects every hopeful homeowner out there: mortgages. The Consumer Financial Protection Bureau (CFPB) has just released its annual report on the mortgage market, and if you’ve tried to buy a home recently, these findings won’t come as a shock.

Brace yourselves—a staggering 4.3 million mortgage applications vanished between 2022 and 2023, marking a jaw-dropping 30.3% drop. And don’t get too comfortable; origination numbers—those are the initial mortgage loans—plummeted by 2.7 million, equivalent to a 32.2% decline. To put it in perspective, current origination volume is only 37.9% of what it was at its peak in 2021. That’s a two-thirds loss in purchase volume! But hold on, there’s more to the story.

Let’s break it down: there are two types of originations—refinancing and home purchases. Traditionally, refinancing has been a go-to move for many, whether to snatch up lower rates or to access some much-needed cash. However, refinancing dropped by more than half from last year to this year, while home purchase originations took a hit of less than a third. It’s a mixed bag for sure!

Now, have you heard of discount or mortgage points? These are upfront payments that borrowers make to snag a lower interest rate, with one point typically equaling a quarter percent reduction for 1% of the loan amount. As rates climbed, the trend of buying points surged, with a notable 12.7% uptick between 2022 and 2023. In real terms, the median discount points for a home purchase hit $3,000 (up 26.6%), while refinance loans saw a whopping $3,902 (a 35.6% increase) in 2023.

When you tally up origination fees and points, the median cost of processing a loan (excluding the down payment) rose from $5,954 in 2022 to $6,684 in 2023—a 12.2% hike. And if you think that’s steep, median refinancing costs soared by 47.2%, escalating from $4,979 last year to $7,329 this year. That’s a hefty price tag, especially for Hispanic white and black borrowers, who saw their median total loan costs rise by 15.1% and 12%, respectively. Meanwhile, non-Hispanic white and Asian borrowers faced increases of 10.5% and 8.0%.

Looking at the numbers more closely, median costs for white Hispanic borrowers reached $9,080, making them the highest among all racial or ethnic groups. Black borrowers followed at $8,464, while Asian borrowers paid $6,625. Non-Hispanic white borrowers enjoyed the lowest median cost at $5,911. It’s a stark reminder of the financial landscape we’re navigating.

For a clearer picture of how interest rates and mortgage payments have evolved, take a look at this graph:

Since the lows of January 2021, mortgage rates and monthly payments have skyrocketed. What that graph doesn’t convey is the surge in median house prices, which we’ll explore next.

And if you want to see the housing market in a historical context, take a look at how today’s prices stack up against those from the 1980s:

Sure, mortgage rates have been higher in the past, which can be a real headache. However, what truly makes homeownership feel like a distant dream for so many is the staggering price tags attached. Back in the 1980s, people managed to secure mortgages even with double-digit rates, but today, the challenge is far greater. For many, the down payment and monthly costs are simply out of reach. It’s time we rethink the narrative around homeownership in America!