U.S. MBA's Mortgage Applications Index Fell 3.2% Last Week By Shobhana Chandra April 4 (Bloomberg) -- Mortgage applications in the U.S. fell for the third consecutive week as purchases cooled and fewer homeowners refinanced, an industry report showed today. The Mortgage Bankers Association's index of applications to buy a home or refinance a loan dropped 3.2 percent last week to 649.5 from the prior week. Home-purchase applications and refinancing both declined to the lowest levels in five weeks. The report may raise concern that a recovery from the residential real-estate slump may take longer as defaults on subprime mortgages rise. Federal Reserve Chairman Ben S. Bernanke has said a bigger housing decline is a risk to the central bank's forecast for ``moderate'' economic growth. ``I don't see a dramatic pickup in sales in coming months,'' said Phillip Neuhart, an economist at Wachovia Corp. in Charlotte, North Carolina. ``Issues in the subprime market are a headwind, and inventories are still very high. When housing does recover, it'll be a very slow process.'' The mortgage applications figures follow a report from the National Association of Realtors yesterday that helped ease concern the real-estate market will get even worse. The report showed more Americans signed contracts to buy previously owned homes in February. The Realtors' index of signed purchase agreements rose 0.7 percent after dropping 4.2 percent in January, yesterday's report said. Economists had forecast a decline. The mortgage bankers group's purchase index fell 2 percent to 402.9 last week, from 411.1 the prior week. It is down 8.1 percent from the same time last year. Refinancing Drops The group's refinancing index fell 4.5 percent to 2098.3, from 2197.7 the prior week. The gauge is up 28 percent from a year earlier. The share of applications for refinancing slipped to 44.5 percent from 45.1 percent the prior week. Refinancing may increase as rates on adjustable loans rise, prompting some borrowers to switch to loans with fixed payments. The share of applications for adjustable-rate mortgages fell to 19.2, the lowest since July 2003. Mounting defaults on subprime mortgages -- loans to people with patchy or poor credit histories -- may put more homes into the market and weaken prices, economists said. Foreclosure filings in February rose 12 percent from a year ago, RealtyTrac, an online listing of foreclosed properties, said last week. As many as 2.4 million Americans may lose their homes because of the collapse of subprime lenders, according to estimates by the Center for Responsible Lending. Fallout `Contained' Even so, the subprime fallout ``is likely to be contained,'' according to Federal Reserve Chairman Ben S. Bernanke's testimony before Congress last week. Bernanke said he still expects the economy will expand at a ``moderate'' pace. The ``adjustment in the housing sector is ongoing,'' Bernanke told lawmakers. Declining property values may bring homes within reach for more buyers, economists said. Home values in 20 American metropolitan areas dropped 0.2 percent in January from a year earlier, according to the S&P/Case-Shiller home-price index. Building activity will remain subdued as sales of new homes fell in February to the lowest level in almost seven years, driving up the supply of unsold properties, according to Commerce Department data. Private residential construction spending fell 1 percent in February after a 1.7 percent slump a month earlier, Commerce said last week. According to government data, the decline in housing subtracted 1.2 percentage points from economic growth in the fourth quarter. Lennar Corp., the largest U.S. homebuilder by revenue, last week reported a 73 percent plunge in fiscal first quarter earnings, and said it may miss its 2007 profit goal. `Very Difficult' Market ``Market conditions are very difficult across the country,'' Miami-based Lennar's Chief Executive Officer Stuart Miller said on a conference call. ``It is unclear today where there is another shoe to drop.'' New Century Financial Corp. this week became the biggest subprime mortgage company to go bankrupt after the lender was overwhelmed by customer defaults. The average rate on a 30-year fixed mortgage rose to 6.13 percent, from 6.04 percent the prior week, today's mortgage bankers report showed. At last week's rate, monthly borrowing costs for each $100,000 of a loan would be about $608. That's $23 less than a year earlier, when the 30-year rate was 6.49 percent. Mortgage rates, which are based on yields on U.S. Treasuries, may continue to rise. The yield on the benchmark 10- year note rose to a five-week high of 4.67 percent yesterday. The average rate on a 15-year fixed mortgage increased to 5.85 percent last week, from 5.77 percent. The one-year adjustable mortgage rate rose to 5.87, from 5.84 percent the prior week. The Mortgage Bankers Association's survey, compiled every week since 1990, covers about half of all U.S. retail residential mortgage originations. To contact the reporter on this story: Shobhana Chandra in Washington at Schandra1@bloomberg.net Last Updated: April 4, 2007 07:00 EDT
One of the CEO's of a big homebuilder said in an almost tearful voice that he was amazed that ANYONE was coming to look at new homes as bad as things were. He was surprised anyone still had the guts to sign a contract with prices falling and lenders going under. I see no surprise in the number. I guess I'd like to know the year on year number, too. We are being fed selective data. Whatever number is most upbeat, I'm afraid.