Mortgage applications fell for a third week as home purchases dropped to their lowest level since the end of 2003, a private group survey found.
The Mortgage Bankers Association's gauge of applications to buy and refinance homes fell 3 percent in the first week of January to 587.8, the lowest since June, from 605.7. Applications to buy homes declined 5.8 percent to 393.1, the lowest since the week that ended Dec. 26, 2003, from 417.3.
Mortgage rates are forecast to rise this year and likely to slow refinancing, according to economists. Higher borrowing costs and a lack of pent-up demand may limit sales.
"The market took a little breather," said David Lereah, chief economist at the National Association of Realtors. "We are going to be somewhat down from the record-setting performance of last year."
Originations of single-family mortgage loans this year may fall to $2.42 trillion, from 2004's projected $2.75 trillion, Frank Nothaft, chief economist at Freddie Mac, said in a conference call Jan. 6.
"Mortgage rates will be gradually rising over the course of 2005 and that will be choking off financial incentive to refinance," Nothaft said. Refinancing will make up a third of mortgage activity for all of this year, he forecast.