The housing recovery is often considered one of the strongest areas of the economy, but rising interest rates continue to weigh on consumers.
According to the Mortgage Bankers Association’s latest report, for the week ended July 5, loan application volume dropped 4 percent on a seasonally adjusted basis from one week earlier. That’s the eighth weekly decline in nine weeks and comes after an 11.7 percent plunge in the previous week. The figures include both refinancing and home purchase demand, and cover more than 75 percent of all domestic retail residential mortgage applications.
The industry group’s refinance index also dropped 4 percent, while the unadjusted purchase index crashed 23 percent. However, the purchase index is still 5 percent higher than the same time last year.
Overall, the refinance share of mortgage activity accounted for 64 percent of total applications, unchanged from the previous week and at its worst level since May 2011.
Interest rates continue to trend higher and cause reason for concern in the real estate market. The average interest rate for a 30-year fixed-rate mortgage hit its highest level since July 2011 at 4.68 percent, compared to 4.58 percent the week before. The most recent average rate for a 15-year fixed-rate mortgage rose to 3.76 percent — also its highest level since July 2011.
Between the beginning of May and the end of June, the average interest rate for a 30-year fixed-rate mortgage surged from 3.59 percent to 4.68 percent. The move has many consumers fearing that rates will continue to rise. According to a new survey from Fannie Mae, the number of respondents who believe mortgage rates will increase over the next year jumped 11 percentage points from May to hit 57 percent in June, the highest level in the survey’s three-year history.
In morning trading, home builder stocks Toll Brothers (NYSE:TOL), PulteGroup (NYSE:PHM), and DR Horton (NYSE:DHI) all edged lower. Shares of The Home Depot (NYSE:HD) and Lowe’s Cos. (NYSE:LOW) dropped nearly 1 percent.
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