NEW YORK (Reuters) — Rising demand last week for loans to buy homes offset a drop in applications to refinance existing mortgages, leaving mortgage applications little changed from the prior week, an industry group said Thursday.
The Mortgage Bankers Association said its mortgage applications index rose 0.1% to a seasonally adjusted 619.4 in the week ended June 29, nearing its lowest level since mid-February.
The MBA's purchase index rose 2.0% to 437.3. But the refinancing applications gauge dropped 2.6% to this year's low of 1,687.2 on a seasonally adjusted basis.
"We've got a huge amount of inventory to work through, particularly of existing homes. but it looks like demand is holding up here," said David Kelly, economic adviser at Putnam Investments in Boston.
The MBA's purchase index has been steadily rising, based on a four-week moving average, to its highest levels since January 2006, he said. New-home sales and housing starts looked stronger in the second quarter than in the first, he added.
Home sales might get a kick from falling mortgage rates.
A report Thursday by Freddie Mac said that 30-year, fixed-rate mortgages averaged 6.63% this week. That was down from last week's 6.67% rate and was the lowest since early June, when rates stood at 6.53%. In mid-June, rates on 30-year mortgages climbed to 6.74%, an 11-month high.
Rates on 15-year, fixed-rate mortgages, a popular choice for refinancing, fell to 6.30% from 6.34%. And, rates on five-year adjustable-rate mortgages averaged 6.29%, down slightly from 6.30%.
However, rates on one-year adjustable-rate mortgages rose to 5.71%, compared with 5.65%.
The mortgage rates do not include add-on fees known as points. All mortgage types each carried a nationwide average fee of 0.4 point last week.
A year ago, average rates on 30-year mortgages stood at 6.79%, 15-year mortgages were at 6.44%, five-year adjustable-rate mortgages averaged 6.39% and one-year ARMs were at 5.82%.
Many economists doubt U.S. housing will emerge from its slump before next year, predicting further price cuts to lure buyers to the huge supply of unsold homes.
Pending sales of existing homes sank to their lowest level in more than 5-1/2 years in May, the National Association of Realtors said last week. Tighter lending practices and a lack of buyer confidence stifled demand, the group said.
There are almost 5 million new and existing homes on the market, and "that's got to be very depressing for a Realtor," Kelly said.
Home builders have sharply cut back on new construction, alleviating some pressure on the housing sector. "I think it's going to be a soggy housing market for a long time, but from an economic perspective the heavy anchor of a plunging home building sector is about to be set loose here," he said.
On a four-week moving average, which smooths volatility, the overall applications index is down 0.2% at 637.1, the purchase index is up 0.2% at 445.4 and the refinancing index is down 1.0% at 1,762.6.
Refinancing represented 37.8% of all applications in the latest week, down from 38.7% in the prior week.
Contributing: Associates Press
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