A drop in mortgage rates failed to spur homebuyer demand last week, according to the latest survey.
The Mortgage Bankers Association's (MBA) survey of mortgage activity shows application volumes fell 3.3 percent for the week ending December 12. Taking out adjustments for seasonal influences, application numbers were down 4 percent week-over-week.
The decline came despite a drop in 30-year fixed mortgage rates to an average 4.06 percent, the lowest level since May 2013. Rates started moving up that month amid speculation the Federal Reserve may start scaling back its monthly asset purchases. Though the Fed has now completely ended that program, economic worries abroad have kept a lid on rates.
"Amid plummeting oil prices and heightened concerns regarding global economic growth, interest rates dropped sharply through the course of the week, with longer-term Treasury yields falling more than 10 basis points," said MBA Chief Economist Mike Fratantoni.
With interest rates so low, many analysts are pointing to credit conditions and affordability concerns as major hurdles holding back mortgage demand, especially among younger potential homebuyers.
Refinance applications in the latest survey were flat compared to December's first week, MBA reported. Meanwhile, purchase applications fell a seasonally adjusted 7 percent and were 5 percent lower than this week last year (non-adjusted).
There was one category that saw a notable pickup: government refinance applications, which were up 11 percent for week. That increase was led by an almost 16 percent gain in refinance applications through the Department of Veterans Affairs.