Number of Mortgage Applications Falls, Bankers Survey Shows

The number of mortgage applications fell to the second-lowest this year as submissions for home purchases and refinancing declined, a private group’s survey showed.The Mortgage Bankers Association said yesterday that its measure of applications fell 4% last week to 594.6, the lowest since the first week of January, from 619.3 the previous week. The group’s purchase index fell 5.2% to 453.1 from 477.9 the week before.Higher home prices and mortgage rates that have risen about three-quarters of a percentage point since June have made homes less affordable, while less refinancing removes a source of cash for consumers. An improving labor market may help cushion the effect of higher costs, allowing sales to slow gradually in 2006 from a record this year, economists said.“While we expect higher mortgage rates and a slackening in demand to cool activity in 2006, we do not anticipate a collapse in housing demand,” a senior economist at Lehman Brothers, Joseph Abate, said before the report.The mortgage bankers group’s refinancing gauge fell 1.6% to 1418.1 from 1441.8, about half its 2005 high reached in June.The average rate on a 30-year fixed mortgage fell to 6.22% from 6.28% a week earlier. The rate is up from 5.47% in the week ended June 24.The average rate on a one-year adjustable mortgage fell to 5.41% last week from 5.5%.At the current 30-year fixed rate, borrowing costs for each $100,000 borrowed would be $613.77 a month. That compares with $536.21 when the rate was at a four-decade low of 4.99% in June 2003. The rate has averaged 6.14% the past five years before yesterday’s report.The National Association of Realtors said sales of existing home will cool to 6.84 million in 2006 from 7.1 million this year, which would be a record.Rising rates and higher prices caused the Realtors’ group’s affordability index in the third quarter to drop to the lowest since the third quarter of 1991.On Tuesday, the Federal Reserve said interest-only and other nontraditional mortgages pose a threat to the financial system and urged banks to tighten lending standards. Such loans become the recourse for Americans who couldn’t otherwise afford to buy a home and are counting on rising home prices to build equity.The prospect of slower sales may be starting to weigh on homebuilder sentiment. Optimism among American homebuilders unexpectedly fell in December to a 32-month low, the National Association of Homebuilders said this week.Lending likely will rise to $2.83 trillion from $2.73 trillion in 2004, the chief economist of Fannie Mae, David Berson, said. A month ago, he predicted $2.68 trillion, the third highest on record. The all-time high stands at $3.76 trillion in 2003, when mortgage rates tumbled.Home prices will jump 13% this year, the most since 1979, Mr. Berson said.Lennar Corporation and KB Home, two of the largest American homebuilders, said earnings in the three months through November increased as people rushed to buy houses before rising mortgage rates make purchases more expensive.

Number of Mortgage Applications Falls, Bankers Survey Shows

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