U.S. Mortgage Applications Fell 5.6% Last Week on Purchases

Mortgage applications in the U.S. declined last week, led by the biggest drop in purchase requests in almost a year.

The Mortgage Bankers Association’s index of loan applications decreased 5.6 percent in the period ended April 22. The group’s gauge of purchases plunged 14 percent, the biggest decline since May, and the refinancing measure fell 0.6 percent.

The prospect of more foreclosures and further declines in home prices may keep potential buyers on the sidelines. Unemployment at 8.8 percent and strict lending requirements mean any recovery in the housing market may take years to unfold.

“The housing market basically has bottomed, but it’s not going to recover any time soon,” Harm Bandholz, chief U.S. economist at UniCredit Group in New York, said before the report. “The housing market is just treading water.”

The average rate on a 30-year fixed loan decreased last week to 4.80 percent from 4.83 percent, the mortgage bankers group said. Borrowing costs reached 4.21 percent in October, a record-low dating back to when the group’s data began in 1990.

The S&P/Case-Shiller index of property values in 20 cities fell 3.3 percent in February from a year earlier, the group said yesterday in New York. The gauge is down 33 percent from its July 2006 peak, almost matching the recession low reached in April 2009.

Real-estate markets for single-family homes “either were little changed from low levels or continued to weaken across all Districts,” in February and March, according to the Federal Reserve’s Beige Book. For homebuilders, “the spring building season is likely to be slower than previously anticipated,” the Fed said in its April 13 regional report.

Home Sales

Previously owned home purchases climbed 3.7 percent to a 5.1 million annual rate in March, a National Association of Realtors report showed April 20. All-cash deals, for which no lending is required, accounted for 35 percent of the transactions, the most on record, while distressed sales were 40 percent of the total, the group said.

Builders see few grounds for optimism. KB Home, the Los Angeles-based homebuilder that targets first-time buyers, this month reported a bigger-than-expected loss for the quarter ended Feb. 28 as orders plunged.

“This recovery has yet to include significant job growth and has not spilled over into housing,” President and Chief Executive Officer Jeffrey Mezger said during a conference call with analysts on April 5. “A difficult housing environment continues.”

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