March 24 (Bloomberg) -- Mortgage applications in the U.S. fell for a second time last week as demand for refinancing dropped by the most in a month.
The Mortgage Bankers Association’s index decreased 4.2 percent in the week ended March 19. The Washington-based group’s refinancing measure declined 7.1 percent, while its purchase gauge rose 2.7 percent.
Applications to buy a home increased for the third time in four weeks, indicating sales may be stabilizing. While the extension and expansion of a homebuyer tax credit may help prop up the real estate market in coming months, job growth is required to provide a sustained boost.
“Right now housing is in a transition,” Robert Dye, a senior economist at PNC Financial Services Group in Pittsburgh. “What I’m expecting to see is a stronger housing market in the next couple of months. There is some pent-up demand from people who could not get out because of the weather and who want to take advantage of the tax credit.”
The government extended a credit for first-time buyers in November and expanded it to include some current owners in a bid to shore up sales. Buyers have to sign contracts by the end of April, and close on deals by June 30, in order to qualify for the incentive.
Demand sagged from December through February, even after the tax credit was extended. Sales of existing U.S. homes fell in February for a third straight month and the number of properties on the market climbed by the most in almost two years, the National Association of Realtors said yesterday.
Concerns Ahead
“After the end of April, we’re going to be in the same situation as we were in January and February, where we see a hollowing out of demand because of the jump in the previous months,” Dye said. “At the same time, we will have very high foreclosures and we also have the likelihood of increasing interest rates.”
The average rate on a 30-year fixed loan rose to 5.01 percent from 4.91 percent a week earlier, the mortgage bankers group said. The prior week’s rate had been the lowest since December.
At the current 30-year rate, monthly payments for each $100,000 of a loan would be $537.43, up $22 from a year earlier, when the rate was 4.64 percent.
The average rate on a 15-year fixed mortgage rose to 4.33 percent from 4.23 percent a week earlier. The rate on a one-year adjustable mortgage held at 6.75 percent.
As lending costs rose, the share of applicants seeking to refinance dropped to 65 percent from 67.3 percent.
