WASHINGTON – Mortgage applications in the U.S. rose last week to the highest level this year, led by a jump in refinances as mortgage rates dropped.
The Mortgage Bankers Association’s index increased 13 percent in the period ended June 10 from the prior week, the largest gain since the week ended March 4, the Washington-based group reported Wednesday. The group’s refinancing gauge rose 16 percent, while its purchase index gained 4.5 percent.
Selling Luxury Real Estate Requires More Than Exposure
By Emilio DiSpirito IV License Partner | Private Office Advisor Engel & Völkers Oceanside www.DiSpiritoteam.com…
Learn More
The third weekly drop in borrowing costs, which has brought the interest rate on 30-year mortgage loans to the lowest level since November, may be encouraging homeowners to lower monthly payments. Even so, further declines in home prices and 9.1 percent unemployment is straining incomes and delaying a sustained recovery in home sales.
“The overall picture is that housing demand is just incredibly weak,” Paul Dales, a senior U.S. economist at Capital Economics Ltd. in Toronto, said before the report. “Even a further fall in mortgage rates or even a massive rebound in economic activity probably won’t make much difference.”
The share of applicants seeking to refinance a loan increased to 70 percent last week, the highest level since the week ended Jan. 21.
The average rate on a 30-year fixed loan decreased to 4.51 percent from 4.54 percent the prior week. Borrowing costs reached 4.21 percent in October, the lowest since the group’s records began in 1990.
Mortgage Rates
The average rate on a 15-year fixed mortgage held at 3.67 percent last week, the report showed.
Indicating continued weakness in the housing market, home prices in 20 cities dropped in March to the lowest level since 2003. The S&P/Case-Shiller index of property values fell 3.6 percent from March 2010, the biggest year-over-year decline since November 2009, the group said in a May 31 report.
A further decline in property values of 10 percent to 25 percent in the next five years “wouldn’t surprise me at all,” Robert Shiller, the economist who co-founded the index, said at a June 9 conference in New York.
With a pipeline of delinquent and foreclosed homes, “the inventory of empty and unsold homes will likely stay elevated for some time, which will maintain downward pressure on house prices,” Federal Reserve Vice Chairman Janet Yellen said during a June 9 speech in Cleveland. Tight mortgage credit is hurting the housing recovery, and “more households should be able to benefit from the greater affordability” as lending improves, she said.
Hovnanian Enterprises Inc., the largest homebuilder in New Jersey, reported on June 8 its net loss widened for the second quarter to $72.7 million, or 69 cents a share, from $28.6 million, or 36 cents, a year earlier. Shares of the Red Bank, N.J.-based company slid the next day the most in a year.
