Mortgage applications continue to falter despite lower mortgage rates and far less dramatic home price gains than a year ago.
Last week, total application volume fell 2.7 percent from the previous week on a seasonally adjusted basis, according to the Mortgage Bankers Association. Applications to refinance were down 4 percent. They had risen slightly in previous weeks despite basically stagnant rates—but possibly on a slight easing of some underwriting. Refinance volume is down nearly 28 percent from a year ago.
Mortgage applications to purchase a home continued to slide, falling 1 percent last week to their lowest level since February. However, they're down just under 10 percent year to year, a smaller annual drop than in previous weeks. Mortgage-dependent buyers have not come back to the housing market as quickly as some expected. Home sales in the second quarter were better than the bitter winter months but still off 4.5 percent from a year ago, the National Association of Realtors reported Tuesday.
Despite turmoil overseas and a rocky road for the stock market, mortgage rates have not moved much this summer. The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($417,000 or less) remained unchanged at 4.35 percent.
"The general lack of movement can't be overemphasized. This is an uncommon occurrence following a move to recent lows fueled by geopolitical risk," wrote Matthew Graham of Mortgage News Daily. "When unexpected headlines cause rapid movements in financial markets, rates don't normally just freeze at the lows for days on end. Not only have things been stagnant in the short term, but the past few months have been exceptionally flat as well."
While the volume of mortgage applications to purchase a home is down 10 percent from a year ago, the dollar amount is down just 1 percent, suggesting that those buyers who are looking to finance a home are buying either more expensive homes or getting larger loans. The average rate on a jumbo mortgage is actually lower than that of a conventional loan; historically it is the other way around. First-time home buyers are still struggling to come back to the housing recovery, and home builders admit they have been focused on more expensive product, as that is where the market strength is now.
—By CNBC's Diana Olick. Follow her on Twitter @Diana_Olick.
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