Mortgage Applications Rebounding

U.S. MBA's Mortgage Applications Index Rose 15.6% Last Week
By Courtney Schlisserman
May 7 (Bloomberg) -- The number of mortgage applications filed in the U.S. rebounded last week as a drop in mortgage rates boosted buying and refinancing.
The Mortgage Bankers Association's index of applications to purchase a home or refinance a loan rose 15.6 percent to 655.4, from 567 the prior week that marked the lowest level this year. Refinancing increased 19.3 percent and the purchase index rose 12.1 percent.
Mortgage rates have started to fall, reflecting Federal Reserve policy makers' efforts to bring down borrowing costs by pumping more money into the banking system. Stricter lending rules may also be prompting borrowers to file multiple applications to try to qualify for a loan.
``Hopefully, if mortgage rates at least stay in this range, I think that people will start to get a little bit better sentiment regarding housing and whether it is a good time to make purchases,'' Russell Price, a senior economist at H&R Block Financial Advisors in Detroit, said before the report.
The lenders group's refinancing gauge rose to 2,273.8 from 1,905.2. The purchase measure increased to 381.3, from 340.1, the lowest level since February 2003.
Applications to refinance rose to 45.9 percent of all loans, from 45.7 percent a week earlier. The share for adjustable-rate mortgages jumped to 12.6 percent, more than double the previous week's total.
The average rate on a 30-year fixed-rate loan decreased to 5.91 percent from 6.01 percent.
Rates Fall
The average rate on a 15-year fixed mortgage fell to 5.49 percent from 5.53 percent. The rate on a one-year adjustable- rate mortgage declined to 6.77 percent from 6.86 percent.
Other reports suggest the housing downturn, now in its third year, is continuing and filtering through to other parts of the economy. House prices in 20 U.S. metropolitan areas dropped 12.7 percent in February from a year earlier, the most since record-keeping began, S&P/Case-Shiller's home-price index showed last week.
Later today, the National Association of Realtors may report that its pending home sales index fell 1 percent in March, according to the median forecast of economists surveyed by Bloomberg News. Earlier this month, the group said sales of existing homes dropped for a seventh time in eight months.
Home sales have been hurt by lack of demand and by banks' reticence to lend following growing losses. A quarterly Fed survey released May 5 showed the share of banks making it tougher for companies and consumers to borrow approached a record over the last three months.
Bernanke's Plea
Fed Chairman Ben S. Bernanke on May 5 urged the government and mortgage lenders to intensify efforts to avoid home foreclosures. He also reiterated a call for lenders to forgive portions of mortgages for some struggling homeowners and said rising defaults may push home prices down further.
Harvard University economist Martin Feldstein said yesterday the biggest risk to the economy is a sharper downturn in housing. Feldstein is also president of the National Bureau of Economic Research, which houses the committee that charts the American business cycle.
``It's really too early to tell,'' Feldstein said in a Bloomberg Television interview. ``Everything hinges on what's going to happen to house prices,'' and ``therefore the whole credit crunch,'' he said. Home prices will ``come down somewhat more.''
Falling home values leave Americans feeling less wealthy, hurting consumer spending and pushing the economy closer to a recession.
Fed policy makers last week cut the benchmark overnight lending rate between banks by a quarter point, to 2 percent. In text accompanying the announcement of the rate decision, the central bank listed ``the deepening housing contraction'' as one of the measures that is ``likely to weigh on economic growth over the next few quarters.''
Homebuilder D.R. Horton Inc. reported a record loss yesterday and said orders fell 25 percent.
To contact the reporter on this story: Courtney Schlisserman in Washington at cschlisserma@bloomberg.net Last Updated: May 7, 2008 07:00 EDT