It didn't take much: A small gain in interest rates had an outsized effect on mortgage applications.
Total volume decreased 4.1 percent last week on a seasonally adjusted basis from the previous week, according to the Mortgage Bankers Association. Rates moved higher for the second week in a row.
"Rising oil prices and an improved outlook for global economic growth combined with declining U.S. jobless claims to push U.S. Treasurys higher during the latter half of last week," said Lynn Fisher, MBA's vice president of research and economics.
The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances (up to $417,000) increased to 3.85 percent from 3.83 percent, with points increasing to 0.35 from 0.32 (including the origination fee) for 80 percent loan-to-value ratio loans.
Refinance applications, which are more rate sensitive, dropped 5 percent from the previous week, seasonally adjusted. Refinance volume is, however, nearly 12 percent higher than one year ago, as rates still hover below 4 percent, which is historically low.
Mortgage applications to purchase a home fell 2 percent from the previous week but are 14 percent higher than the same week one year ago.
"News about new home sales and single family housing starts fell short of expectations in the last week, however some of March's housing activity was likely pulled forward into one of the warmest Februarys on record," said Fisher. "While purchase applications fell slightly last week, the average level for April is the highest since 2010."
The drop in applications may be mirroring buyer frustration in this spring's market. There is definitely strong demand, but precious few affordable homes available. Forty-one percent of buyers surveyed by Realtor.com reported that they have yet to find a home that meets their needs, and 30 percent of buyers indicated that they cannot find a home within their budget.