Mortgage demand is falling off a cliff, even as rates stabilize

Mortgage applications have continued their downward slide even as mortgage rates ticked down for the first time in months.

Applications for new home purchases dropped 7% through Friday compared to a week earlier, while refinancing deals were down 2%, according to Mortgage Bankers Association data. Compared to a year ago, purchase applications are down 18% as buyers remain priced out of the market.

The latest declines come even as the average 30-year fixed-rate mortgage dropped for the first time in two months to 7.41%, according to MBA calculations, suggesting that many buyers feel priced out by current market conditions.

"It is very clear that the higher mortgage rate environment has cooled the housing market this fall," Joel Kan, the MBA's vice president and deputy chief economist, said in a statement.

National Association of Realtors data released on Tuesday showed that pending home sales plunged in September to the lowest level in 25 years.

Claire Boston is a senior reporter for Yahoo Finance covering housing, mortgages, and home insurance.