The Mortgage Bankers Association said its seasonally adjusted index of mortgage applications, which includes both purchase and refinance loans, for the week ended March 28 fell 28.7 percent to 688.3.
The index, however, gained 48.1 percent the previous week.
Overall mortgage applications last week were 6.0 percent above their year-ago level. The four-week moving average of mortgage applications, which smooths the volatile weekly figures, was up 0.11 percent to 744.5.
The U.S. housing market is currently suffering one of the worst downturns in its history. Last week's drop in demand may indicate what is in store for the hard-hit sector this spring, which is the peak home-buying season.