The housing recovery is often considered one of the strongest areas of the economy, but higher interest rates continue to weigh on consumers.
According to the Mortgage Bankers Association’s latest report, for the week ended July 12, loan application volume dropped 2.6 percent on a seasonally adjusted basis from one week earlier. That’s the ninth weekly decline in 10 weeks and comes after a 4 percent decline 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 fell 4 percent to reach its lowest level since July 2011, while the unadjusted purchase index jumped 23 percent.
Overall, the refinance share of mortgage activity accounted for 63 percent of total applications, which is slightly worse from the previous week and its lowest level since April 2011.
Interest rates remained at multiyear highs and caused more reason for concern in the real estate market. The average interest rate for a 30-year fixed-rate mortgage stayed at its highest level since July 2011 at 4.68 percent, unchanged from the week before. The most recent average rate for a 15-year fixed-rate mortgage edged lower to 3.7 percent, compared to 3.76 the week before.
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 recent 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 Wednesday morning trading, shares of home builders like Lennar (NYSE:LEN) and PulteGroup (NYSE:PHM) edged slightly lower. KB Home (NYSE:KBH) shares declined nearly 1 percent. However, home-improvement names like Home Depot (NYSE:HD) and Lowe’s (NYSE:LOW) both moved higher.
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