Housing Demand Faces Headwinds as Mortgage Rates Exceed 6.64%

Housing demand is facing significant headwinds as mortgage rates have climbed above 6.64%, a critical level identified in demand models. Historically, housing markets have shown stronger performance when mortgage rates fall below this threshold, approaching 6%. The current elevated rate environment raises questions about the sustainability of housing demand growth.

Recent purchase application data for the week ending March 15, 2026, revealed a double-negative print, indicating a decline both week-to-week and year-over-year. While a 7% week-to-week decrease was anticipated due to seasonal patterns, it marked only the third negative year-over-year print of the year, with a 2% decrease. The market is also approaching more challenging comparative periods, as demand began to accelerate in mid-June 2025.

Purchase application statistics for 2026 to date show 11 positive week-to-week prints, 14 negative prints, and 2 flat prints. The year has seen 10 weeks of double-digit year-over-year growth and 24 weeks of positive year-over-year growth, contrasted by the 3 negative year-over-year prints. Despite these figures, weekly pending home sales data has largely remained positive, with adjustments for factors like the January snowstorm. Last week, pending home sales reached 63,971, an increase from 61,143 in the same week of 2025. Total pending sales for the week were 403,406, up from 387,590 in 2025.

An earlier 2026 forecast predicted an additional 237,000 existing home sales if mortgage rates could remain below 6.25%. This condition has not been met. Federal Reserve members have adopted a hawkish stance over the past two months, contributing to the rise in mortgage rates and impacting the housing market's outlook.