Mortgage applications barely budged last week, despite recent reports of a surge in home sales, data from the Mortgage Bankers Association (MBA) show.
Total application volume fell 0.2 percent week-to-week, according to the MBA, and is now down nearly 37 percent on year. While refinance volume has dropped by nearly half from a year ago and was essentially flat week-to-week, applications to purchase a home are not improving as expected. They fell one percent on week on a seasonally adjusted basis and are down nearly 16 percent on year.
Read MoreUK mortgage approvalsfall in signs of cooling
This comes amid an improvement in home sales. Sales of both new and existing homes rose in May, as pent-up demand from the slow winter months was unleashed. Those numbers, however, are backward-looking, while mortgage applications portend sales in the coming months. The stall in mortgage volume therefore could mean slower sales in the second half of the year, much as the National Association of Realtors has predicted.
"Applications are certainly down across the board," said Matt Weaver, Florida-based vice-president of mortgage banking at PMAC Lending Services. "We feel that this is a direct connection to children recently being out of school and the start of summer and vacationing."
Mortgage rates, meanwhile, have moved even less than applications. They continue to waver in a narrow range, although they are slightly lower than they were one year ago, the first time that has happened in a year. The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($417,000 or less) decreased to 4.28 percent from 4.33 percent on the MBA survey.
Mortgage rates moved slightly higher Tuesday, thanks to the stock market rally. As investors poured money into stocks, bonds suffered and mortgage rates loosely follow the yield on the 10-year Treasury bond. This comes as home price gains seem to be easing. A monthly report from CoreLogic showed prices nationally, including distressed sales, up 8.8 percent on year in May. Double-digit price appreciation has been sidelining some buyers, especially entry-level buyers. The price ease could help matters later this year, especially if interest rates rise.
Read MoreWill higher rentsdrive up mortgage rates?
"Families start shopping mid-to-late July and falling into August which creates a strong 4th quarter. I really expect a significant increase over the next few weeks and am staffing accordingly," added Weaver.
—By CNBC's Diana Olick. Follow her on Twitter @Diana_Olick.
Questions? Comments? Facebook.com/DianaOlickCNBC