May 26 (Bloomberg) -- The number of mortgage applications in the U.S. rose last week by the most in a month as homeowners took advantage of borrowing costs close to a record low to refinance.
The 11.3 percent increase in the Mortgage Bankers Association’s applications index for the week ended May 21 followed a 1.5 percent drop the previous week, the Washington- based group said today. Refinancing surged 17 percent, the most since February. Purchase applications fell to the lowest level since 1997.
The figures show declining mortgage rates alone may not be enough to sustain the housing market following the expiration of a government homebuyer tax credit. An improving job market will also be needed to help stem mounting foreclosures.
“There’s some positives supporting housing late into the year and in 2011, but those will come into play after the short- term setback,” Nigel Gault, chief U.S. economist at IHS Global Insight in Lexington, Massachusetts, said before the report. “If employment keeps growing that will make people more confident.”
The share of applicants seeking to refinance a loan rose to 72.2 percent last week from 68.1 percent the prior week.
Refinancing demand hasn’t been “crazy or dramatic” with low rates “not as big a deal” as they were in November 2008, when the Federal Reserve said it would buy mortgage securities, Steven Jacobson, chief executive officer of Madison, Wisconsin- based Fairway Independent Mortgage Corp. said May 24 in an interview at a Mortgage Bankers Association conference in New York.
Thirty-Year Rate
The average rate on a 30-year fixed loan fell to 4.80 percent, the lowest since November, from 4.83 percent. The rate reached a record low 4.61 percent in March 2009 after the Fed expanded its mortgage-purchasing plan aimed at pushing down borrowing costs. The program ended in March.
At the current 30-year rate, monthly payments for each $100,000 of a loan would be about $524.67, compared with $525.27 a year ago when the rate was 4.81 percent.
The average rate on a 15-year fixed mortgage increased to 4.25 percent from 4.19 percent the previous week. The rate on a one-year-adjustable mortgage rose to 6.83 percent from 6.81 percent.
The tax credit for first-time homebuyers, which was extended in November to include some current owners, required contracts be signed by April 30 and closed by June 30.
New-Home Sales
A Commerce Department report later today is projected to show new-home sales rose to a 425,000 level in April, according to the median estimate in a Bloomberg News survey. Existing home sales increased to a 5.77 million rate, the National Association of Realtors reported May 24.
Pulte Group Inc., the largest U.S. homebuilder by revenue, said the number of houses it sold in the first quarter fell even after it combined operations with rival Centex Corp.
“The U.S. housing industry is finding, and may have already found, a bottom, but that’s different from saying that a recovery is at hand,” Richard J. Dugas, the company’s chairman and chief executive officer, said on a conference call with analysts on May 5. “Even a modest uptick in employment could have a significant impact on demand, assuming it drives greater confidence.”
