U.S. MBA Mortgage Applications Index Decreased 11% Last Week

By Courtney Schlisserman Dec. 23 (Bloomberg) -- Mortgage applications in the U.S. fell last week for the first time in a month as purchases and refinancing weakened. The Mortgage Bankers Association’s index of loan applications decreased 11 percent to 595.8 the week ended Dec. 18, the lowest level since October, from 667.3 the prior week. The group’s refinancing gauge dropped 10 percent, while... [more]

By Courtney Schlisserman Dec. 23 (Bloomberg) -- Mortgage applications in the U.S. fell last week for the first time in a month as purchases and refinancing weakened. The Mortgage Bankers Association’s index of loan applications decreased 11 percent to 595.8 the week ended Dec. 18, the lowest level since October, from 667.3 the prior week. The group’s refinancing gauge dropped 10 percent, while purchases declined for a second consecutive week. Mortgage rates are now near levels seen at this time last year, giving households less reason to lower monthly payments. Even so, reports this week point to a recovering housing market, with existing home sales rising last month and a measure of home prices increasing in October for the first time in three months. “The housing market is coming back,” Christopher Low, chief economist at FTN Financial in New York, said before the report. While “the sales pace is quite strong” and “inventories are down”, the U.S. is probably six months from working off the excess supply, he said. The mortgage bankers group’s refinancing gauge fell to 2,889.9 from 3,214 the prior week. The purchase index dropped to 213.3, the lowest in more than month, from 241.2. A report yesterday showed home demand is growing. Sales of existing homes climbed in November to the highest level since February 2007, the National Association of Realtors reported. A separate report yesterday from the Federal Housing Finance Agency showed home prices increased 0.6 percent in October, the first gain since July. Government Efforts Home sales have gotten a boost from government and Federal Reserve efforts to stabilize the industry, including the extension of a tax credit for first-time buyers and debt purchases that have kept mortgage rates close to record lows. The Fed last week signaled it would keep lending rates low for “an extended period” to foster growth. The average rate on a 30-year fixed loan held at 4.92 percent last week, according to the mortgage bankers group. The rate reached 4.61 percent at the end of March, the lowest since the group’s records began in 1990. At the current 30-year rate, monthly borrowing costs for each $100,000 of a loan would be $531.94, or about $8 less than the same week a year earlier, when the rate was 5.04 percent. The average rate on a 15-year fixed mortgage rose to 4.34 percent from 4.33 percent a week earlier. The rate on a one- year adjustable mortgage held at 6.52 percent. Refinancing Because purchase applications dropped more, the share of applicants seeking to refinance a loan rose to 75.9 percent of the total, the highest since April, from 75.2 percent the prior week. Hovnanian Enterprises Inc., New Jersey’s largest homebuilder, said Dec. 16 its fourth-quarter loss narrowed as the number of signed contracts rose 1 percent compared with the same quarter a year earlier. Housing has bottomed, distressed property sales and foreclosures have abated, and inventories are trimmer, Robert Toll, chief executive officer of Horsham, Pennsylvania-based Toll, the largest U.S. luxury homebuilder, said this month. “We don’t know how fast we’re coming back, but we do know we’re coming back,” Toll said in a Bloomberg Television interview Dec. 11. “There’s a pretty good reservoir of pent-up demand.” The Washington-based Mortgage Bankers Association’s loan survey, compiled every week, covers about half of all U.S. retail residential mortgage originations. [less]