Mortgage applications drop by most in five months

More signs of a slowdown in what had been a heated U.S. housing market. Home mortgage applications dropped by the most in nearly five months last week.

The Mortgage Bankers Association said Wednesday its index fell 6.9% from the week before. Driving that index down: drops of 8% in refinancing activity and 5% in home purchase applications.

The MBA noted that the average loan size for applications had increased. That, it said, signals that first-time homebuyers, who typically apply for smaller loans, are likely being squeezed out of the market because the supply of entry-level homes for sale is limited.

Low inventory, combined with record-high prices, have been behind the consecutive monthly drops in sales of new and existing homes this year. What’s more, high prices for lumber have limited the ability of builders to ramp up construction.

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