Mortgage requests hold at high level

Stability in rates seen as fuel for applications and for refinancing

October 10, 2004|By BLOOMBERG NEWS

A measure of the number of applications to buy a home or refinance a mortgage held this month at the highest level since early May, a private group's survey found.

A reading of 724.8 in the Mortgage Bankers Association's gauge of loan demand for the week that ended Oct. 1 compared with 724.7 the prior week. The last time the index was higher was in the first week of May.

The average rate on a 30-year fixed mortgage has remained below 6 percent since early July. Refinancing, a source of cash for consumers that helped support the economy last year, increased for the fifth straight week, the longest stretch since February- March. The refinancing index was the highest since April.

"We're seeing a stability in mortgage rates which is fueling demand for mortgages and refinancing," said Bob Moulton, president of Americana Mortgage Group Inc., the No. 2 real estate broker on Long Island in New York.

The mortgage bankers group's refinancing index rose 2.7 percent last week to 2,270.8 from 2,211.1. The gauge of applications to purchase homes fell 2.2 percent to 459 from 469.1 the week before.

Applications to refinance made up 47.1 percent of total bids last week, up from 45.9 percent the week before. Adjustable rate mortgages rose to 33.9 percent of all applications from 32.5 percent.

Low borrowing costs and stronger home sales helped boost August construction spending by 0.8 percent. The $1.02 trillion annual rate reported by the Commerce Department on Oct. 1 was a record.

New-home sales, measured at the time a purchase contract is signed, jumped 9.4 percent last month, according to the latest government figures.

Housing is an issue in this year's presidential campaign, with President Bush saying his policies have contributed to record homeownership levels. Democratic challenger John Kerry has said Bush hasn't done enough to ensure that housing is available and affordable.

The National Association of Realtors and Fannie Mae expect sales to slow next year as interest rates rise and the pool of eligible buyers gets smaller. Sales of previously owned homes fell to a 6.54 million-unit annual rate last month, the National Association of Realtors said Sept. 24.

"The demand is still strong because there's not a lot of inventory in the major metro areas. However, we are seeing a softening in terms of the median price," Moulton said. A drop in home prices might be welcome because it would bring more buyers into the market, he said.

Average home prices in the United States have risen 24 percent since 2001, more than three times as fast as wages, and may be keeping some prospective buyers out of the market. In addition, recent private reports suggest growth in the labor market is not improving at the rate some had hoped.

The mortgage bankers survey covers about 50 percent of all retail residential mortgage originations and has been conducted weekly since 1990. The base period is March 16, 1990, when the value for all indexes was 100.

Baltimore Sun Articles
Please note the green-lined linked article text has been applied commercially without any involvement from our newsroom editors, reporters or any other editorial staff.