Mortgage application index posts 4th decline

December 18, 2005|By BLOOMBERG NEWS

WASHINGTON -- The number of mortgage applications submitted fell for a fourth time in five weeks, reflecting declines in home purchases and refinancing, a private group's survey showed.

The Mortgage Bankers Association said that its index of applications dropped 5.7 percent to 619.3 in the week that ended Dec. 9, from 656.7 the previous week. The level was the lowest since January. The group's gauge of refinancing slumped to its lowest level since June 2004.

Higher borrowing costs this year than last have slowed home sales and limited refinancing, a source of cash that's supported consumer spending and the economy. Federal Reserve policymakers on Tuesday raised their benchmark interest rate a 13th straight time.

"Clearly, the higher interest rates are affecting the housing market," said Robert B. MacIntosh, chief economist at Eaton Vance Corp. in Boston. "It does portend a slight slowing of the economy."

The National Association of Realtors predicted Monday that home sales would cool to 8.07 million in 2006 from 8.39 million this record year.

Refinancing has slumped by half since June, removing a source of cash for consumers as rising mortgage rates make it less beneficial for homeowners to tap into home equity.

"I would say this year is the end of a very euphoric run for the homebuilders," said Richard J. Dugas Jr., chief executive of Pulte Homes Inc. "The last two or three years have been nothing short of amazing. We're headed, however, into a more normalized environment."

The mortgage bankers group's refinancing index decreased 9.7 percent to 1,441.8 in the week ending Dec. 9, from 1,596.4, while the purchase index fell 3.5 percent to 477.9 from 495.1 the week before.

The share of total applications for adjustable-rate mortgages rose to 33.5 percent from 33.1 percent a week earlier. Those for refinancing decreased to 40.2 percent last week from 41 percent.

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