U.S. mortgage applications rose for the first
time in four weeks, reflecting a jump in demand for home refinancing
loans as interest rates on 30-year loans dropped below 5 percent, data
from an industry group showed on Wednesday.
The
Mortgage Bankers Association said rates on 30-year fixed-rate
mortgages, the most widely used loan, fell below 5 percent for the
first time in four weeks.
The 5 percent level is something of a psychological tipping point, typically sparking home loan refinancing activity.
The
MBA said its seasonally adjusted index of mortgage applications, which
includes both purchase and refinance loans, for the week to Oct. 30
increased 8.2 percent to 608.3.
The hard-hit U.S. housing market, a primary
driver of the worst U.S. recession since the 1930s, has been showing
signs of stabilization after a three-year slump, but remains highly
vulnerable to setbacks.
Ronald
Temple, portfolio manager and co-director of research at Lazard Asset
Management in New York, believes there has been a false sense of
security surrounding the state of the U.S. housing market.
"There
is a consensus out there that the worst is over but they are
discounting a little too much the benefit we've gotten from the
government's intervention," he said.
Temple said a flood of foreclosures in the
pipeline and higher interest rates on the horizon will likely act as a
headwind from here. "We may be headed back to rockier times as it
relates to housing," he said.
Low
mortgage rates, high affordability and the federal government's $8,000
tax credit for first-time home buyers — part of the stimulus bill —
have helped pave the way for stabilization.
The National Association of Realtors said
pending sales of previously owned U.S. homes unexpectedly rose in
September to their highest level in nearly three years ahead of the
Nov. 30 expiration of the tax credit. However, it appears likely that
the tax credit will be extended.
The
U.S. House of Representatives is expected to back a Senate plan to
extend a popular homebuying tax credit through April and also expand
its scope, House Majority Leader Steny Hoyer said on Tuesday.
With
distressed properties making up a high proportion of sales, the recent
uptick in activity may mask uncertainty about the long-term outlook.
The Federal Reserve is focused on keeping mortgage rates low, but that should wane in the months ahead.
"We had a nice respite but there is a little
too much complacency out there and we may have more downside ahead of
us," Temple said. "We should not get complacent because short-term
indicators look good," he said.
The
MBA said borrowing costs on 30-year fixed-rate mortgages, excluding
fees, averaged 4.97 percent, down 0.07 percentage point from the
previous week. The rate remained above the all-time low of 4.61 percent
set in the week ended March 27.
The
survey has been conducted weekly since 1990. Nevertheless, interest
rates were well below the year-ago level of 6.47 percent. Low interest
rates did not impact applications to buy a home, a tentative early
indicator of sales.
The
MBA's seasonally adjusted purchase index fell 1.8 percent to 250.3. The
four-week moving average of mortgage applications, which smoothes the
volatile weekly figures, was down 5.5 percent.
Refinancing Jumps
The Mortgage Bankers seasonally adjusted index of refinancing applications increased 14.5 percent to 2,693.7.
The
U.S. housing market has suffered the worst downturn since the Great
Depression and its impact has rippled through the recession-hit
economy, as well as the rest of the world.
Home
price declines have been moderating in many regions of the country and
in some areas have risen. Some analysts, however, say prices may fall
again, with a new wave of foreclosures in the pipeline that is viewed
as one of the largest obstacles to a recovery.
Fixed
15-year mortgage rates averaged 4.33 percent, down from 4.53 percent
the previous week. Rates on one-year ARMs increased to 6.83 percent
from 6.79 percent.