This Housing Gauge Is Still Showing Weakness

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With interest rates rising to their highest level in a month, mortgage applications declined last week and continued to show that housing affordability issues remain a concern.

According to the Mortgage Bankers Association’s latest report, for the week ended November 8, loan applications fell 1.8 percent on a seasonally adjusted basis from one week earlier, the 19th drop in only 27 weeks. That followed a drop of 2.8 percent in the previous week, which was revised higher from a 7 percent plunge. The figure includes both refinancing and home purchase demand and covers more than 75 percent of all domestic retail residential mortgage applications.

The industry group’s refinance index fell 2.3 percent from a week earlier. Overall, the refinance share of mortgage activity accounted for 66 percent of total applications, unchanged from a week earlier and 9 percent above its lowest level since April 2010. The seasonally adjusted purchase index declined 1 percent after recently hitting its worst level since the end of December 2012.

The average interest rate for a 30-year fixed-rate mortgage increased from 4.32 percent to 4.44 percent, the highest rate in a month. The most recent average rate for a 15 year fixed-rate mortgage came in at 3.52 percent, compared to 3.44 percent the week before.

Even though interest rates are low on a historic basis, affordability is near its worst level in about five years due to surging home prices. In September, home prices across the nation increased on a year-over-year basis for the 19th consecutive month. According to CoreLogic, a property information and analytics provider, home prices jumped 12 percent in September from a year earlier. In fact, home prices have posted double-digit gains for eight straight months.

In morning trading, shares of Home Depot (NYSE:HD) and Lowe’s (NYSE:LOW) both jumped nearly 1 percent. Meanwhile, home builders PulteGroup (NYSE:PHM) and Toll Brothers (NYSE:TOL) edged slightly into positive territory. Shares of D.R. Horton (NYSE:DHI) fell 1 percent.

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