NEW YORK — U.S. mortgage applications fell for a second consecutive week, hitting their lowest level in nearly 6-1/2 years despite a sharp drop in interest rates, an industry group said Wednesday.
The Mortgage Bankers Association said its seasonally adjusted index of mortgage applications for the week ended June 20, which includes both purchase and refinance loans, dropped 9.3 per cent to 461.3 – the lowest level since the week ended Dec. 28, 2001.
The report offers additional evidence of a U.S. housing market that is suffering one of the worst downturns in its history. Significantly tighter lending standards and an unwieldy supply of homes for sale are some of the factors preventing the U.S. housing market from rebounding out of its two-year-long slump.
The frenzy of foreclosures hitting the market is aggravating matters adding to the supply of unsold homes and depressing home prices nationwide, analysts say.
The jump in foreclosure sales explains part of the sharp drop in home prices since foreclosures typically sell at about a 20-per cent discount to the market, according to Michelle Meyer, an economist at Lehman Brothers in New York.
“Foreclosures and falling home prices are mutually reinforcing,” she said in commentary published on Tuesday before the report was issued.
Borrowing costs on 30-year fixed-rate mortgages, excluding fees, averaged 6.39 per cent, down 0.18 percentage point from the previous week.
Interest rates were also below year-ago levels of 6.60 per cent.
The MBA's seasonally adjusted purchase index dropped 7.4 per cent to 333.4. The index came in well below its year-earlier level of 428.9 – a drop of 22.3 per cent.
Overall mortgage applications last week were 25.4 per cent below their year-ago level. The four-week moving average of mortgage applications, which smoothes the volatile weekly figures, was down 6.1 per cent to 507.3.
The group's seasonally adjusted index of refinancing applications plunged 12.1 per cent to 1,212.2, down 30.0 per cent from its year-ago level of 1,731.6.
The refinance share of applications decreased to 36.3 per cent from 37.4 per cent the previous week. The adjustable-rate mortgage share of activity decreased to 8.5 per cent, down from 9.7 per cent the previous week.
Fixed 15-year mortgage rates averaged 5.95 per cent, down from 6.14 per cent the previous week. Rates on one-year ARMs decreased to 7.09 per cent from 7.22 per cent.
While U.S. housing market indexes tend to be volatile, data from the MBA may help gauge how the hard-hit sector is faring.
More insight into the state of the U.S. housing market will emerge this week. The Commerce Department will release data on new U.S. single-family home sales on Wednesday. The National Association of Realtors will release data on U.S. sales of existing-home sales on Thursday.
© The Globe and Mail
