(Reuters) – The U.S. saw a drop of 3% in mortgage application volume last week, owing to a decrease in loans for home purchases. Data released Wednesday provided another indicator that housing market growth is being held back by the low inventory.

According to the Mortgage Bankers Association, its weekly composite index that tracks mortgage applications volumes fell 0.6% from a week before to 588.4. This was the lowest point since January 2020’s first week.

This was due to a decline in purchase loan volume, the lowest within a month. However, there was a slight uptick of refinancing requests, which had been at their lowest level in nearly two years, as mortgage interest rates rose.

From 3.3% last week, the contract rate for a 30-year conventional mortgage (the most common form of U.S. home loans) fell to 3.27%. In late November they topped out at 3.311%, which is their highest point since April. These rates are currently about 0.4 percentage points above the historical lows that were about a full year ago.

At $416,200 the average loan application size, the highest in history, was recorded in the week just ended. This indicates that the majority of activity has been concentrated at the top end of the market.

Joel Kan (MBA’s Associate Vice President of Economic and Industry Forecasting) stated in a statement that “Home-price appreciation continues to grow faster than historical averages” and that inventory, especially for starter homes, is still trailing strong demand.

The National Association of Realtors (NAR) will publish its November home sales data later Wednesday. It is likely to reveal that transaction volumes have increased for the third consecutive month. Oxford Economics’ economists stated that they expect home sales to slow down despite this expected improvement. They said limited inventory and high price “have made it unaffordable” for some buyers.