Home Loan Applications Drop Nearly 20 Percent

According to a recent Bloomberg article, home loan applications in the US fell last week by the most since February, defying efforts by President Barack Obama’s administration to revive the sluggish housing market.   The Mortgage Bankers Association’s index of applications to home purchase loans or mortgage refinancing declined 19% to 444.8 in the week ended June 26 from 548.2 the prior week. The group’s refinancing gauge declined 30% to the lowest in seven months, while the index of purchases fell 4.5%.  Unemployment, which touched a 26-year high in May, and rising borrowing costs discouraged homeowners from refinancing, while a growing number of foreclosures sidelined potential buyers waiting for house prices to stop tumbling.

Pending home sales showing contracts signed in May rose 0.1%, compared with a gain of 6.7% in April, the National Realtors Association said today.   “2nd in FHA mortgage rates is exacting a toll in terms of depressing mortgage applications,” Brian Bethune, chief U.S. financial economist at IHS Global Insight in Lexington, Massachusetts, said in an interview. “The economy is in a phase of attempting to find a bottom. Anything that comes in the way of that, like higher rates, is going to mean it takes longer.”

Home loan rates climbed above 5% the week of May 29th for the 1st time in three months, according to mortgage bankers’ data, and have remained elevated relative to 10-year Treasuries. The percentage age of consumers who said they plan to buy a home in the next six months fell to 2.7 % in June from 2.8 % in May, the Conference Board in New York said yesterday. FHA home loans have been a great opportunity for 1st time homebuyers to jump into the real estate market with only 3.5% of the sales price required for the down-payment. 

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