U.S. MBA Mortgage Applications Index Increased 8.2% Last Week

Mortgage applications in the U.S. rose last week to their highest level in more than a month as declining borrowing costs spurred purchases and refinancing.

The Mortgage Bankers Association’s index increased 8.2 percent in the period ended May 6, the Washington-based group reported today. The group’s refinancing gauge advanced 9 percent, the biggest gain in nine weeks, while its purchase index rose 6.7 percent.

Consumers are taking advantage of the lowest mortgage rates this year to lower payments on current loans or buy distressed properties. At the same time, unemployment at 9 percent, falling home prices and the prospect of more foreclosures coming onto the market mean any recovery in housing will take time to develop.

“When rates drop, the refi index tends to respond pretty quickly,” Patrick Newport, an economist at IHS Global Insight in Lexington, Massachusetts, said before the report. “Demand for homes is still extremely weak. We’ll see better numbers over the course of the year but they won’t end the year much better than now.”

The average rate on a 30-year fixed loan decreased to 4.67 percent, the lowest since early December, from 4.76 percent the prior week. 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 3.81 percent from 3.96 percent, the report showed.

More Refinancing

The share of applicants seeking to refinance a loan rose to 63.1 percent last week from 62.7 percent the prior week.

Recent data indicate the industry that helped trigger the recession is struggling. Sales of previously owned homes, which make up about 95 percent of the housing market so far this year, climbed 3.7 percent in March as a mounting supply of properties in or near foreclosure lured investors, the National Association of Realtors reported on April 20. Even with foreclosure drumming up demand, sales were 30 percent below their September 2005 peak.

All-cash deals made up 35 percent of the transactions, the most on record, while distressed properties including foreclosures and short sales accounted for 40 percent of all deals, the agents’ group said.

The S&P/Case-Shiller index of property values in 20 cities fell 3.3 percent in February from a year earlier, the biggest year-over-year decline since November 2009, the group said April 26. Prices were 32 percent below their July 2006 peak.

Builders are having a hard time selling new homes because they compete with existing homes, which include foreclosures and short sales.

Builder Losses

Ryland Group Inc., a homebuilder and mortgage finance firm, posted a net loss for the quarter ending March 31, due to rising inventories, write-offs and reduced closing volume, the Calabasas, California-based company said April 27.

“The spring selling season is under way and at this point the best way to characterize how it’s trending would be uneven,” President and Chief Executive Officer Larry Nicholson said on a conference call. “Some weeks we see real signs of improvement, other weeks it’s a struggle to get buyers to commit.”

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