Mortgage applications fall Wed Aug 24, 2005 7:40 AM ET
NEW YORK (Reuters) - Applications for U.S. home mortgages decreased last week, with purchasing activity falling for the first time in a month despite slightly lower interest rates, an industry group said on Wednesday.
The Mortgage Bankers Association said its seasonally adjusted index of mortgage application activity fell 0.7 percent to 756.2 in the week ended Aug. 19, denting the previous week's 2.2 gain.
The MBA's purchase index, a gauge of loan requests for home purchases, dropped 2.2 percent to 488.4, erasing the previous week's 0.1 percent gain.
However, the MBA's seasonally adjusted index of refinancing applications rose 1.2 percent to 2313.9 after climbing 5 percent the prior week.
Fixed 30-year mortgage rates fell 1 basis point, or 0.01 of a percentage point, to an average of 5.78 percent, excluding fees, compared with 5.79 percent in the previous week.
While the 30-year rate is below the 2005 high of 6.08 percent reached in late March and the 2005 low of 5.47 percent of late June, it matches its level of a year ago of August 2004.
MBA chief economist Doug Duncan says long-term mortgage rates should hit 6 percent by year-end and 6.5 percent by the end of 2006, curbing price appreciation of homes next year to around 4 percent from recently reported double-dight percentage gains.
The National Association of Realtors (NAR) on Tuesday reported that the national median existing home price at $218,000, up 14.1 percent from a year ago.
Government data show home prices up more than 50 percent over the past five years, fueled by the lowest interest rates in decades.
Fixed 15-year mortgage rates last week averaged 5.41 percent, up from 5.40 percent the previous week.
Rates on one-year adjustable-rate mortgages (ARMs) decreased to 4.84 percent last week from 4.85 percent one week earlier.
HOUSING BOOM COOLING?
In its report Tuesday, the NAR reported sales of existing U.S. homes dropped 2.6 percent in July as the pace of both condominium and single-family home purchases slowed across nearly the entire country.
Despite the decline, July's sales were the third highest on record.
Data on sales of new U.S. homes in July is scheduled for release on Wednesday at 10 a.m. EDT (1600 GMT.)
If this second, smaller leg of the housing market also shows weakness it could be taken as a sign that housing is finally cooling off as interest rates heat up a bit.
New home sales are forecast at an annual rate of 1.333 million units, down from 1.374 million in June, according to a Reuters poll.
Tracking trends over the past month-long period, the MBA's four-week moving average of mortgage application activity edged 0.1 percent higher to 753.7 from 753.2.
The purchase index's four-week moving average rose 0.2 percent to 495.3 from 494.4. The refinancing index's four-week moving average fell 0.1 percent to 2256.6 from 2258.2.
ARM DEMAND DECREASING
Refinancings last week increased as a percentage of all mortgage applications, rising to 43.7 percent from 42.4 percent, the MBA said.
Demand for adjustable-rate mortgages fell for a second consecutive week, it added.
The ARM share of activity stood at 28.1 percent of total applications last week, down from 28.9 percent the previous week and its 2005 high of 36.6 percent reached in the week ended March 25.
With ARMs, low initial payments allow borrowers to buy homes they may not be able to afford with a fixed-rate loan.
The MBA's survey covers about 50 percent of all U.S. retail residential mortgage originations and has been conducted weekly since 1990. Respondents include mortgage bankers, commercial banks and thrifts.
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