Mortgage applications in the U.S. fell last week as a decline in borrowing costs failed to spur home buying.
The Mortgage Bankers Association’s index of loan applications declined 0.7 percent in the week ended March 11. The group’s purchase index fell 4 percent, while a measure of refinancing climbed 0.9 percent.
The prospect of further declines in home prices and more foreclosures in coming months may be prompting Americans to refrain from purchases. Federal Reserve policy makers said yesterday that the housing market is “depressed,” as they stuck to their plan of buying Treasuries to boost economic growth.
“Demand remains very sluggish at this point,” Scott Anderson, a senior economist at Wells Fargo Securities LLC in Minneapolis, said before the report. “We still have a glut of existing homes, and that’s the main problem. Jobs are still a concern.”
The average rate on a 30-year fixed loan decreased last week to 4.79 percent, the lowest since Jan. 14, from 4.93 percent. Borrowing costs reached 4.21 percent in October, the lowest since the group’s records began in 1990.
The average rate on a 15-year fixed mortgage fell to 4.03 percent from 4.17 percent.
The share of applicants seeking to refinance a loan rose to 66.4 percent from 65.5 percent the prior week.
A report today from the Commerce Department is projected to show housing starts fell 5 percent in February to a 566,000 annual rate, according to the median forecast of economists surveyed by Bloomberg News. Starts averaged 585,000 in 2010.
Sales of previously owned homes, which make up more than 90 percent of the market, climbed in January to the highest level in eight months, as distressed sales accounted for 37 percent of all sales, the National Association of Realtors said on Feb. 23. All-cash purchases were 32 percent of total sales during the month. People purchasing with cash don’t apply for mortgages.
New-home sales fell 13 percent in January to a 284,000 annual pace, the Commerce Department reported Feb. 24. That compares with a 274,000 low reached in August.
Lower interest rates and cheaper homes are encouraging for some builders because they make owning a property more affordable. The S&P/Case-Shiller index of home values in 20 cities fell 2.4 percent in December from a year earlier, the biggest 12-month decrease since December 2009, the group reported last month. Prices were down 31 percent from their peak in July 2006.
“Affordability remains at near an all-time high,” Martin Connor, chief financial officer at Toll Brothers Inc., said at a March 7 investors conference in Orlando, Florida. Thirty-year mortgage are around 4.9 percent and “that’s still a historically low rate. And prices are depressed. We have some optimism, but we’re cautious.”