Julie Haviv
USA Today
NEW YORK — Mortgage applications rose sharply last week, reflecting a surge in refinancing loans as interest rates remained near recent lows, an industry trade group said Wednesday.
The Mortgage Bankers Association said its seasonally adjusted index of mortgage application activity, which includes both refinancing and purchasing loans, increased 8.8% to 620.9 the week ended Nov. 3 from the previous week’s 570.8.
Dean Maki, chief U.S. economist at Barclays Capital in New York, said the indexes tend to be volatile but the steady decline in interest rates the past few months has been good news for the U.S. housing market.
“The bottom line is that the decline in mortgage rates has been a significant development and that combined with strong gains in real income for consumers does suggest that home sales are set to stabilize,” he said. “Overall economic growth is picking up in the fourth quarter even as housing stays weak.”
Borrowing costs on 30-year fixed-rate mortgages, excluding fees, averaged 6.24% last week, unchanged from the previous week, but well below a four-year high 6.86% in June. Interest rates were also below year-ago levels of 6.31%.
Fueling the rise in mortgage applications last week was an 11% rise in the MBA’s seasonally adjusted index of refinancing applications to 1,897.9. The refinance share of applications edged up to 46.3% from 45% the previous week.
Demand for home purchase loans was also robust.
The MBA’s seasonally adjusted purchase index, widely considered a timely gauge of U.S. home sales, rose 7.1% to 402.2. But the index was still substantially below its year-ago level of 465.7.
While mortgage lenders benefited from the increase in demand for home loans last week, several U.S. home builders said Tuesday that they are being hurt by the slowdown in the country’s once-soaring real estate market.
Toll Brothers (TOL), a luxury home builder, said it expects to report a 10% drop in quarterly home-building revenue, while Beazer Homes USA (BZH), which builds houses largely for first-time buyers, posted a 44% decline in quarterly earnings. Hovnanian Enterprises (HOV), another luxury home builder, said it expects a fourth-quarter net loss.
“We’re still in the midst of the housing construction downturn and that will go on for several more months,” said Maki. “We expect this environment of soft residential construction, but solid growth in the overall economy to continue.”
Maki also said that Democrats winning control of the House of Representatives on Tuesday should not have any near-term macro economic effects on housing and the economy.
The gap between some fixed- and floating-rate loan rates is slim. Fixed 15-year mortgage rates averaged 5.96% last week, up from 5.94%. Rates on one-year adjustable-rate mortgages, or ARMs, dipped to 5.89% from 5.93%.
But a widening gap between these two types of loans may have spurred a rise in ARM demand last week.
The ARM share of activity increased to 26.4% of applications from 25.9% the previous week.
The MBA’s survey covers about half of U.S. retail residential loans. Respondents include mortgage banks, commercial banks and thrifts.
