"The market continues to absorb the cumulative impact of the large price and rate increases that led to a plunge in affordability," he said. "As a result, over the rest of the year purchase demand likely will continue to drag, supply will modestly increase, and home price growth will decelerate."
Mortgage application activity was lower last week from the week before and overall applications have declined to their lowest levels since 2000, according to the Mortgage Bankers Association.
"Home purchase applications continued to be held down by rapidly drying up demand, as high mortgage rates, challenging affordability, and a gloomier outlook of the economy kept buyers on the sidelines," said Joel Kan, MBA's associate vice president of economic and industry forecasting.
However, he said, if home price growth slows more significantly and mortgage rates move lower, purchase activity may bounce back later in the year.
Still, affordability remains a challenge for many prospective home buyers, especially when compared with the cost of financing a home just last year.
A year ago, a buyer who put 20% down on a $390,000 home and financed the rest with a 30-year, fixed-rate mortgage at an average interest rate of 2.86% had a monthly mortgage payment of $1,292, according to calculations from Freddie Mac.
Today, a homeowner buying the same priced house with an average rate of 5.13% would pay $1,700 a month in principal and interest. That's nearly $408 more each month.