Home-Loan Applications for New Houses Fall 15%, MBA Says

Loan applications for purchases of new U.S. homes tumbled last month, a sign rising mortgage rates may have damped demand for builders, according an index released today by the Mortgage Bankers Association.

The Builder Application Survey showed a 15 percent decline in loan submissions in June from the previous month, the Washington-based group said in a statement. The newly created gauge tracks application volume predominantly from mortgage units of large homebuilders across the country.

The survey may be an indicator of new-home sales, since the mortgage application is typically made around the time the sales contract is signed, said Michael Fratantoni, vice president of research and economics at the Mortgage Bankers Association. A jump in mortgage rates, spurred by expectations that the Federal Reserve will reduce its stimulus program, has sparked concern that housing demand will weaken as buying costs increase.

“This short-term pause, caused by increasing mortgage rates, that wouldn’t be unexpected,” Fratantoni said during a call with reporters. “Our expectation is that the housing recovery is still in pretty good shape.”

The average rate for a 30-year fixed mortgage climbed this week to 4.51 percent, the highest in almost two years, according to a statement today from McLean, Virginia-based Freddie Mac. It was at a near-record low of 3.35 percent in early May.

Share Rally

Homebuilder shares, which have fallen 13 percent from a May high, rallied today after Fed Chairman Ben S. Bernanke said that a policy effort to keep interest rates low “for the foreseeable future” is needed. The 11-member Standard & Poor’s Supercomposite Homebuilding index gained 7.1 percent, the biggest one-day jump since October 2011.

The mortgage-bankers survey captures about 20 percent of the new-home sales market, with greater participation with lenders affiliated with larger builders. It isn’t adjusted for seasonal patterns, which may have affected the June decline because February through May are historically the strongest months for new-home contract signings, Fratantoni said.

The group’s broader mortgage applications gauge has fallen 20 percent in the past four weeks, pulled down by a plunge in refinancing. The purchase measure, which has slumped 7.1 percent from early June, is more closely correlated to existing-home sales since those are a much bigger part of the market, according to the bankers association.

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