Less people applied for mortgage loans to either purchase a home or to refinance their existing mortgage loan according to a survey of mortgage lenders released yesterday morning.
A weekly survey conducted by the Mortgage Bankers Association reported that in the week ending October 9, mortgage applications to purchase homes fell 5 percent from a week ago, while mortgage applications to refinance fell 0.1 percent from the prior week.
The weekly survey indicates that households responded to rising mortgage rates and some postponed applying for a mortgage loan in anticipation that mortgage rates would soon fall again. The survey reported that 30-year mortgage rates finished the week at 5.02 percent compared to a 4.88 percent rate a week earlier. The one-year adjustable rate mortgage finished the week at 6.71 percent compared to a 6.56 percent rate a week ago.
The survey also reported that refinance applications comprised 67.4 percent of all mortgage applications, while purchase applications accounted for 32.6 percent. ARM applications accounted for only 6.2 percent of total applications.
The drop in purchase applications in the latest week was disappointing news for the housing markets but the purchase index held on to some of the large gains it experienced in the previous week. The purchase index has trended upward since the beginning of the year, but only modestly. Historically, purchase applications have been a reliable indicator of future home sales activity.
Today’s housing news does not alter the view that the housing sector is stabilizing and on the road to recovery. However, the housing market continues to face serious obstacles and the pace of future home sales are expected to be constrained. Continued job losses throughout the economy remain a hurdle to a housing recovery, inhibiting housing demand. Further, it is likely that foreclosures will continue to climb due to expiring state moratoriums as well as rate resets on option ARM and interest only loans. On a positive note, the $8,000 homebuyer tax credit, which has been effective in elevating housing demand but is set to expire at the end of November, is likely to be extended for another 6 months.