U.S. home loan applications slumped last week after climbing for three straight weeks, an industry group said Wednesday, as falling demand for home purchase loans overshadowed a fourth consecutive weekly rise in refinancing requests.
The Mortgage Bankers Association said its seasonally adjusted index of mortgage application activity dropped 2.8% to 654.2 in the week ended Sept. 21.
The drop was driven by the seasonally adjusted index of applications for home purchases, which slid 7.3% to 418.8, its lowest level since late July, the MBA said.
Weaker demand for applications to buy homes is consistent with other industry and government reports finding sales and prices slumping to multiyear lows.
Sales of existing homes sank in August to a five-year low, while the supply of unsold single-family houses ballooned to an 18-year high, the National Association of Realtors said on Tuesday.
More restrictive lending standards are making it harder for many borrowers to get mortgages approved.
As many as one in 10 home sales fails to close in many markets because potential buyers are unable to get financing, the NAR said. In some markets this fallout rate is almost 30%.
Prior increases in the MBA application indexes that seemed to run counter to widespread evidence of a troubled housing market largely reflected borrowers submitting multiple applications in the hope of getting one approved, economists have said.
Home price weakness accelerated in July, when the annual drop in the 10 largest cities was the sharpest since 1991, according to a Standard & Poor's/Case-Shiller index reported on Tuesday.
The MBA's gauge of home refinancing rose 3.3% last week to 2,026.5, the highest since mid-May. Homeowners are refinancing adjustable mortgages before the products reset to much higher interest rates than on the current loans.
Refinancing represented 46.4% of all applications, up from 43.5% the prior week. The share of adjustable-rate mortgage loan requests fell to 12.2% from 12.6%.
Fixed 30-year mortgage rates rose 9 basis points to 6.38% last week, the MBA said. The rate on 1-year adjustable mortgages fell 30 basis points to 6.09%.