Mortgage Applications Index in U.S. Fell for a Fourth Week

Mortgage Applications Index in U.S. Fell for a Fourth Week
Falling home values are making it harder for Americans to refinance even as borrowing costs drop. Photographer: Derick E. Hingle/Bloomberg

The number of mortgage applications in the U.S. declined last week for a fourth straight time, led by a drop in refinancing even as mortgage rates declined to the lowest on record.

The Mortgage Bankers Association’s index fell 0.8 percent in the week ended Sept. 24 to the lowest level in almost two months, the Washington-based group said today. Refinancing also dropped to a seven-week low, while purchases increased for the first time in three weeks.

Falling home values are making it harder for Americans to refinance even as borrowing costs drop. At the same time, with the unemployment rate near a 26-year high and stricter lending standards, housing demand will be slow to improve.

“With lack of job growth, with lack of credit growth you’re simply not going to get housing and the economy growing well,” Michael Gregory, a senior economist at BMO Capital Markets in Toronto, said before the report.

Reports last week showed sales of existing homes in August were the second-lowest in more than a decade and those of new homes were the second-lowest in records going back to 1963. Home prices rose 3.2 percent in July from a year earlier, the smallest gain since March, according to a report from S&P/Case-Shiller released yesterday.

The mortgage banker’s group’s refinancing gauge fell 1.6 percent. The purchase measure increased 2.4 percent.

Record Low

The average rate on a 30-year fixed mortgage fell to 4.38 percent, the lowest in records going back to 1990. At that pace, monthly payments for each $100,000 of a loan would be about $499.58, or $34 less than a year ago when the rate was 4.94 percent.

The average rate on a 15-year fixed loan fell to 3.77 percent from 3.88 percent, also the lowest on record, and the rate on a one-year adjustable increased to 7.04 percent from 6.96 percent.

The share of applicants seeking to refinance a loan fell to 80.7 percent from 81.3 percent.

Sales plummeted after the deadline for signing contracts and becoming eligible for a government homebuyer tax credit worth as much as $8,000 expired on April 30.

The Obama administration said Aug. 30 it planned to announce a proposal for an emergency loan program to help the unemployed avoid default. The plan would also include a government mortgage refinancing effort to lower monthly mortgage payments for Americans facing foreclosure.

Orders at KB Home, a California builder focused on first-time buyers, fell 39 percent after the deadline for signing a contract to qualify for the federal tax credit expired. Unemployment and rising foreclosures make it difficult to forecast future sales, Jeffrey Mezger, the company’s chief executive officer, said Sept. 24.

“The housing market continues to face significant headwinds from high unemployment and foreclosures, which are impeding a broader recovery, and recent net order trends in the homebuilding industry have injected additional caution into our near-term outlook,” Mezger said in a statement.

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