Purchase applications are falling three and a half times as fast as signed home contracts

The daily quote and Freddie Mac's weekly average sit 29 basis points apart ^[1], and on the median house that difference is about $67 a month ^[3]. Take August's median existing-home price of $429,100 ^[8] and put 20% down: the loan is $343,280. At 7.24% over 360 months the principal and interest run roughly $2,339 a month; at 6.95%, roughly $2,272 ^[2]. Over the first twelve payments that is about $800 ^[3]. The comparison with last year costs more than that, and Fortune did not publish a year-ago rate. Brett Johnson, a Colorado real estate agent, told the magazine the increase means some families will pay hundreds of dollars more per month ^[16].

Applications are falling faster than the traffic above them and faster than the contracts below them. Google searches for "homes for sale" were down 15% from a year earlier, according to Redfin ^[5], and signed contracts fell by less than that. The loss concentrates in the middle of the funnel, which is the part a lender is paid for. The buyers still closing are increasingly the ones who never file an application. The National Association of Realtors put first-time buyers at under a third of sales ^[11]. Bess Freedman, chief executive of the brokerage Brown Harris Stevens, told Fortune that buyers with enough cash are "having an easier time" ^[12].

Existing-home sales at an annual pace just under 4 million, multiplied by that $429,100 median, come to about $1.72 trillion of gross transaction value a year ^[6]. Commissions and origination fees are both drawn from that figure.

The median itself rose 1.6% from a year earlier ^[8], and the West was the only region where prices fell, by 0.2% ^[9]. The distance between the reported median and what a seller nets cannot be measured from these numbers; Redfin put no dollar value on the concessions behind those sales. "When borrowing money is expensive, buyers have less patience for an overpriced house," Johnson said ^[13]. Benjamin Schieken, who founded the mortgage-shopping platform Fincast, told Fortune that some sellers are "pushing back against" the lower list prices their agents now recommend ^[14].

Applications are the noisiest series here, and a week in which borrowers wait for a better lock overstates the damage. If Freddie Mac's average retreats from 6.95% ^[2], much of the decline comes back quickly. The alternative reading is that signed contracts, not applications, predict Q4 closings, in which case brokerage revenue lands close to flat and only the lenders are short. I would expect origination volume to fall further than transaction counts through the fourth quarter, because the shrinking piece of the mix is the financed buyer. The Federal Reserve's increases to fight persistent inflation ^[3] are not yet pointed the other way. If November brings a higher application count alongside a lower contract count, I have the broken end of the funnel wrong.