The low rates, however, were not enough to boost mortgage volumes: applications to refinance a loan fell a seasonally adjusted 3 percent on the week, and are down nearly 57 percent on the year, according to the mortgage bankers survey. Applications to purchase a home—a closely watched indicator of the housing recovery—fell 4 percent on the week and are 17 percent below year-ago volumes. This does not bode well for home sales as the market moves from the traditionally robust spring season to the slower summer months.
"The lack of movement on mortgage applications even with a significant drop in rates confirms what we have seen for much of the past five years. Namely, that lower rates alone are not enough to generate home purchase activity," said Guy Cecala of Inside Mortgage Finance. "Home prices, mortgage underwriting, employment, and a basic belief that it is a good time to buy home are major factors that seem to influence home buying more than rates."
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Spring was a disappointment for home sales due in part to bad weather. Some believed pent-up demand would surface later, but signed contracts to buy existing homes in April were essentially flat from March and down about 9 percent from April 2013. It begs the question, why are more Americans not taking advantage of lower rates to buy homes?
The answer may be that many people are struggling with their personal finances. A new survey from the MacArthur Foundation, conducted by Hart Research Associates, found that while the public may believe the housing crisis is improving, many respondents do not feel personal relief with their monthly housing costs: seven in 10 believe the U.S. housing market is still in the middle of the crisis or that the worst is yet to come.