WASHINGTON – Mortgage applications in the U.S. climbed last week as the lowest borrowing costs since November propelled refinancing.
The Mortgage Bankers Association’s index rose 4.1 percent in the period ended Aug. 12 from the prior week, the Washington-based group reported Wednesday. The group’s refinancing measure increased 8 percent, while the purchase gauge fell 9.1 percent to the lowest level in a year.
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Limited employment gains and a pipeline of foreclosures driving down home prices may be keeping consumers from buying homes, hindering a housing recovery. At the same time, current owners are taking advantage of near record-low mortgage rates to bring down monthly payments.
“We continue to see purchases remain very weak, but because we’re in such a low interest rate environment refinancing is picking up,” Anika Khan, an economist at Wells Fargo Securities in Charlotte, N.C., said before the report.
The share of applicants seeking to refinance a loan climbed to 78.8 percent, the largest share since November, from 75.6 percent the prior week.
The average rate on a 30-year fixed loan decreased to 4.32 percent, the lowest since November, from 4.37 percent the prior week. The average rate on a 15-year fixed mortgage declined to 3.47 percent from 3.52 percent, the report showed.
Recent data signal the residential real estate industry continues to struggle. Housing starts fell 1.5 percent to a 604,000 annual rate in July, the Commerce Department reported Tuesday.
Prices Fall
Home values dropped by the most in 18 months for the year ended in May. The S&P/Case-Shiller index of property values in 20 cities decreased 4.5 percent, the group reported last month. Sales of new homes also declined in June for the second straight month.
Limited job growth could hinder a housing market rebound. The unemployment rate has been hovering around 9 percent since the beginning of the year, Labor Department figures show. Gross domestic product expanded at a 1.3 percent annual pace in the second quarter after almost stalling in the previous three months, a July 29 Commerce Department report showed.
Slow growth and an uncertain economic environment are combining to make selling new homes “very challenging,” said Allan Merrill, chief financial officer of Beazer Homes USA Inc.
“Job growth and consumer confidence have to be pillars of any housing recovery,” Merrill said on an Aug. 9 conference call with analysts. “Until they both show signs of strengthening, we expect the level of new home sales to remain suppressed.”
The Atlanta-based homebuilder reported a loss in the third- quarter.
