The Housing Market Continues This Losing Streak

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Despite a slight dip in interest rates, mortgage applications continued their losing streak. In the latest update from the Mortgage Bankers Association, for the week ended March 14, applications for home loans fell 1.2 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 nine months 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 and Purchase Index also decreased 1 percent from the previous week. On an unadjusted basis, the Purchase Index was 15 percent below year-ago levels.

Overall, the refinance share of mortgage activity accounted for 56.5 percent of total applications, the lowest share in about two years and down from 57 percent a week earlier. In fact, the refinance share of mortgage activity has now dropped for six consecutive weeks.

The average interest rate for a 30-year fixed-rate mortgage edged lower, to 4.5 percent from 4.52 percent. Meanwhile, the average rate for a 15-year fixed-rate mortgage dipped to 3.52 percent from 3.53 percent. Although mortgage rates declined, the housing recovery story will likely draw more skepticism this year.

Earlier this week, the U.S. Department of Commerce reported that home builders broke ground on houses at a seasonally adjusted annual rate of 907,000 units in February, down 0.2 percent from the revised January estimate of 909,000 units. February was the weakest month for housing starts since October. Furthermore, housing starts were 6.4 percent below the year-ago rate of 969,000 units.

The cold weather has received much of the blame for poor economic reports this year, but other factors, such as housing affordability, are also responsible. Housing starts in the frozen Northeast crashed 37.5 percent in February, the biggest drop in more than two years. Making matters worse, housing starts in the West declined 5.5 percent, which cannot be blamed on weather. The Midwest also received its fair share of snow and ice this winter, but housing starts surged 34.5 percent.

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