Mortgage Applications Fail to Stop Deterioration

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Despite interest rates holding steady, mortgage applications declined once again as serious concerns remain about the housing market. In the latest update from the Mortgage Bankers Association, for the week ended April 4, applications for home loans fell 1.6 percent on a seasonally adjusted basis from one week earlier. On an unadjusted basis, the index decreased 1 percent.

There has been a steady slide in mortgage applications over the past year as the housing market returns to a more sustainable pace. As the chart above shows, applications are near their worst level in years. The Refinance Index dropped 5 percent from the previous week and reached its lowest level since the end of 2013. The Purchase Index managed to increase 3 percent, but on an unadjusted basis, the index was still 14 percent below year-ago levels.

Overall, the refinance share of mortgage activity accounted for 51 percent of total applications, its worst level in nearly five years and down from 53 percent a week earlier. In fact, the refinance share of mortgage activity has now dropped for nine consecutive weeks.

The average interest rate for a 30-year fixed-rate mortgage was unchanged at 4.56 percent, the highest level in about two months. Meanwhile, the average rate for a 15-year fixed-rate mortgage remained at 3.62 percent. Although mortgage rates are still near historic lows, the housing recovery story will likely draw more skepticism this year as higher prices and stagnant wages cause affordability issues.

Earlier this week, Black Knight Financial Services reported that monthly mortgage originations for February plunged to their lowest level in at least 14 years. However, investors are boosting home sales.

“February’s data showed the continued trend of declining origination activity we’ve been observing since mid-2013, with monthly originations falling to their lowest recorded point since at least 2000,” said Herb Blecher, senior vice president of Black Knight’s Data and Analytics division. “In spite of this decline, residential real estate sales have remained strong due at least in part to investor activity and the fact that cash sales account for almost half of all transactions.”

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