U.S. Mortgage Applications Fell 5.1% Last Week on Refinancing

Mortgage applications in the U.S. dropped for a fourth straight week, led by a decline in refinancing even as borrowing costs dropped.

The Mortgage Bankers Association’s index fell 5.1 percent in the period ended July 8 from the prior week, the Washington-based group reported today. The group’s purchase gauge decreased 2.6 percent, while the refinancing measure dropped 6.2 percent.

Smaller job gains and a tight credit landscape may be keeping consumers from entering the housing market, preventing a sustained recovery. At the same time, a surplus of distressed properties driving prices down could be making it harder for home owners to refinance current mortgages.

“Without stronger job growth it’s not possible for consumers to purchase more homes,” Celia Chen, a housing economist at Moody’s Analytics Inc. in West Chester, Pennsylvania, said before the report. “The other thing constraining the housing market is that there’s not much financing available for buyers unless they have excellent credit. Many folks who would want to buy a house just can’t get a loan to do that.”

The share of applicants seeking to refinance a loan fell to 65.6 percent last week from 66.4 percent the prior week.

The average rate on a 30-year fixed loan fell to 4.55 percent from 4.69 percent the prior week, the biggest drop in three months. The average rate on a 15-year fixed mortgage decreased to 3.68 percent from 3.79 percent, the report showed.

Falling Prices

Other recent data suggests that the industry that helped fuel the last recession is struggling to improve. The S&P/Case-Shiller index of property values in 20 cities fell 4 percent from April 2010, the group reported on June 28. Purchases of previously owned homes fell in May to the slowest annual rate in six months, the National Association of Realtors said June 21.

Weak employment gains may be weighing on consumers’ ability to buy a home. U.S. employers added 18,000 jobs in June, the fewest in nine months, as the unemployment rate climbed to 9.2 percent, the Labor Department reported last week. Consumer confidence dropped in early July from its highest level in 10 weeks, according to the Bloomberg Consumer Comfort Index.

Lagging consumer confidence and stringent loan requirements are keeping Americans’ from entering the housing market, said Stuart Miller, chief executive officer of Lennar Corp.

“Sales remain constrained by available financing and confidence,” Miller said on a June 23 conference call with analysts. “Today’s ultra-conservative home finance environment has been a limiting factor in the normalization of demand and confidence for both new and existing homes.”

Miami-based Lennar, the third-largest U.S. homebuilder by revenue, reported second-quarter profits that beat analysts’ estimates.