Mortgage Applications Rose in U.S. for Third Straight Week on Refinancing

Mortgage applications in the U.S. rose for the third consecutive week as the number of homeowners seeking to refinance continued to climb from a one-year low.

The Mortgage Bankers Association’s index of loan applications increased 5 percent in the week ended Jan. 14, figures from the Washington-based group showed today. The refinancing gauge rose 7.7 percent, the biggest since early October, while purchase applications fell to a two-month low.

Home prices that continue to decrease and stricter lending standards have led to a drop in purchase applications in five of the past six weeks. The unemployment rate, above 9 percent for 20 months, needs to fall to restore housing demand.

“There’s going to be a very, very slow improvement in the housing market,” Joshua Shapiro, chief U.S. economist of Maria Fiorini Ramirez Inc., a New York economic forecasting firm, said before the report. “Against the back drop of home prices still coming down, the saving grace is an improvement in the labor market.”

The group’s purchase index declined 1.9 percent last week to the lowest level since the period ended Nov. 12. The refinancing gauge climbed for a third straight week.

The average rate on a 30-year fixed loan dropped to 4.77 percent last week from 4.78 percent the prior week. The rate reached 4.21 percent in October, the lowest since the group’s records began in 1990.

At the current 30-year rate, monthly payments for each $100,000 of a loan would be $522.85, or about $14.58 less than the same week the prior year, when the rate was 5.01 percent.

The average rate on a 15-year fixed mortgage rose at 4.16 percent from 4.15 percent.

Share of Refinancing

The share of applicants seeking to refinance a loan rose to 73 percent last week from 72.1 percent the prior week.

“Refis are a good number in terms of getting some early indications of what sales may be doing and whether or not these low rates are triggering people getting off the fence and making some moves,” Joel Naroff, president of Naroff Economic Advisors in Holland, Pennsylvania, said before the report.

Home prices have declined each month from August to October, the last month reported, according to the S&P/Case- Shiller index of property values, which tracks 20 U.S. cities.

Confidence among U.S. homebuilders has stagnated as a lack of credit threatens to hold back construction this year. The National Association of Home Builders/Wells Fargo sentiment index registered a reading of 16 in January for a third month, a report showed yesterday. Readings below 50 mean more respondents said conditions were poor.

A report today may show builders began work on fewer homes in December, a sign the industry that triggered the recession continues to struggle more than a year into the economic recovery. Housing starts dropped 0.9 percent to a 550,000 annual rate, according to the median estimate of 69 economists surveyed by Bloomberg News ahead of a Commerce Department report.

The Mortgage Bankers Association’s loan survey, compiled every week, covers about half of all U.S. retail residential mortgage originations.

To contact the reporter on this story: Alex Kowalski in Washington at akowalski13@bloomberg.net

To contact the editor responsible for this story: Christopher Wellisz at cwellisz@bloomberg.net

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