Applications for mortgages up 7.5%
Lower prices may be luring buyers
WASHINGTON - Mortgage applications in the United States rose for a second straight week, a sign that falling home prices are attracting some buyers.
The Mortgage Bankers Association's index of applications to purchase a home or refinance a loan gained 7.5 percent to 513.4 in the week ended July 4, from 477.7 the prior week. The group's purchase index increased 6.7 percent and its refinancing gauge climbed 8.7 percent.
Declining prices are making US homes more affordable for some consumers who qualify for mortgage loans, while others are waiting for a further drop in values. At the same time, rising borrowing costs and a glut of unsold homes indicate the deepest housing slump in a quarter century is unlikely to be over anytime soon.
"Unprecedented declines in home prices are beginning to work to level off the sales," said Bill Hampel, chief economist at the Credit Union National Association in Washington. "But the housing market isn't out of the woods yet."
The mortgage bankers' purchase index rose last week to 365.8 from 342.8 the previous week. The refinancing gauge increased to 1379.3 from 1269.2.
The share of applications for refinancing climbed to 37.3 percent from 36.8 percent the prior week.
The applications report may overstate demand because the survey only includes retail lenders, which have probably seen an increase in business as many wholesale brokers closed their doors.
A report from the National Association of Realtors Tuesday showed contracts to buy previously owned homes declined more than forecast in May, a sign that prices that have been sliding for more than two years have yet to touch bottom.
Mortgage rates also are ticking up. The average rate on a 30-year fixed-rate loan rose to 6.43 percent, from 6.33 percent the prior week, the mortgage bankers report showed yesterday.
At the current rate, monthly borrowing costs for each $100,000 of a loan would be $627, up $59 from the low this year reached in January.
The average rate on a 15-year fixed mortgage increased to 5.94 percent from 5.90 percent. The rate on a one-year adjustable mortgage rose to 7.24 percent after 7.14 percent the prior week.
Home prices in 20 US metropolitan areas fell in April by the most on record, signaling the housing recession is far from over, according to the S&P/Case-Shiller home-price index released last month.
Housing-related companies continue to suffer.
"We don't expect to be able to raise capital until there is more stability and less uncertainty in the housing and mortgage markets," IndyMac chief executive Michael Perry said in a statement.
The Washington-based Mortgage Bankers Association's loan survey, compiled every week since 1990, covers about half of all US retail residential mortgage originations.
