In 2021, 16.4 million Americans applied for a mortgage. In 2023, that number was 7.2 million. The mortgage market didn't slow down — it lost more than half its application volume in two years, and the applications that remained were rejected at nearly double the rate.
A note on terminology: this is a collapse in mortgage application volume and approval rates — driven by the Fed's rate-hike cycle pricing buyers out of the market — not a collapse in home prices. Home values rose through most of this period. Fewer people could qualify to buy at those prices; that's the story here.
In 2020 and 2021, mortgage rates sat below 3%. Volume nearly doubled from 2018, and denial rates fell to their lowest point in the dataset — 16.4%. Then the Federal Reserve raised rates from near-zero to over 5% in 18 months. Volume didn't just normalize. It cratered to less than half of the 2021 peak, and denial rates climbed back above pre-pandemic levels.
California alone lost nearly 1.5 million mortgage applications between 2021 and 2024 — not because fewer people wanted homes, but because at 7% interest rates, far fewer people could qualify or chose to try.
Comparing the same two pre/post-pandemic years strips out the COVID-era anomaly and shows which states structurally improved or worsened over six years.
| State | 2018 | 2024 | Change |
|---|---|---|---|
| Hawaii | 25.6% | 33.7% | +8.1pp |
| Montana | 18.1% | 22.2% | +4.1pp |
| Louisiana | 29.7% | 33.6% | +3.9pp |
| Utah | 18.7% | 21.9% | +3.1pp |
| Mississippi | 30.4% | 33.5% | +3.0pp |
| Puerto Rico | 27.3% | 21.3% | −6.0pp |
| Connecticut | 27.0% | 24.6% | −2.4pp |
| New York | 28.2% | 26.5% | −1.7pp |
| State | 2024 Denial Rate |
|---|---|
| Hawaii | 33.7% |
| Louisiana | 33.6% |
| Mississippi | 33.5% |
| Florida | 31.4% |
| West Virginia | 30.8% |
In these five states, roughly one in three mortgage applications was denied in 2024 — more than double the rate in the lowest-denial states the same year.
Hawaii's deterioration isn't explained by interest rates alone — every state faced the same Fed cycle, and most didn't see anything close to an 8-point jump. The more specific driver: a condominium insurance crisis that intensified sharply after the 2023 Maui wildfires. Hundreds of Hawaii condo buildings became underinsured for hurricane risk, with premium increases reported as high as 1,000% in some buildings. Fannie Mae and Freddie Mac will not purchase loans on buildings that aren't insured to full replacement value — effectively freezing financing for a meaningful share of Hawaii's housing stock, regardless of the borrower's qualifications.
⚡ Analyze a filePrices and rates are widely reported. Whether a lender says yes is not. In the complete 2025 federal record, denial rates across the 100 largest FHA lenders ran from 1.8% to 78.7% — same programme, same year.
And it is not simply who applies where: standardizing on state, loan amount, income, debt-to-income and loan-to-value, applicant mix explains only a 2.7× range in expected outcomes.
CFPB HMDA 2025, computed by FinanceRateCalc. Covers the highest-volume lenders published per market, not all lenders. Historical observations, not predictions. CC BY 4.0, not independently reproduced.