Demand for mortgage applications fell 2.2% in the past week, according to the Mortgage Banker's Association's latest survey.
A combination of rising mortgage rates and higher home prices is denting demand.
Even the refinancing market took a 3% hit over the prior week.
“Record-low inventory is pushing home-price growth at double the rate from a year ago, and even above the 10% growth rates seen in 2005," said Joel Kan, MBA’s associate vice president of economic and industry forecasting. "The housing market is in desperate need of more inventory to cool price growth and preserve affordability,” he added.
The 30-year fixed rate mortgage declined 3 basis points to 3.33%, which is still almost half a percentage point higher than at the beginning of the year.
“Higher mortgage rates continue to shut down refinance activity, as the pool of borrowers who can benefit from a refinance further shrinks," added Kan.
The seasonally adjusted Purchase Index decreased 2% from one week earlier.
The survey covers over 75% of all U.S. retail residential mortgage applications. It has been conducted weekly since 1990.