Home Mortgage Demand Cools

The Mortgage Bankers Association reported today that the demand for home mortgages cooled last week as rising home mortgage rates curbed refinance loan requests that had soared to a 14-month high. Home mortgage loan requests to buy homes rose for the second straight week to the highest level since the end of June, but hovered just above 13-year lows. Home refinancing still represents nearly 8 out of every 10 home loan applications.

Many consumers doubt that job market improvement is around the bend, and lending standards remain tight, putting home buying out of reach even with borrowing costs near record lows. The industry group’s mortgage market index fell by a seasonally adjusted 4.4 % in the week ended July 23. A 5.9 % drop for mortgage refinance applications overshadowed a 2.0 % rise in home purchase loan demand.

The average 30-year mortgage rates climbed to 4.69 %, up 0.10 percentage point in the week from the lowest level since the group starting tracking rates weekly in 1990. Low borrowing costs and high affordability drove the slight pick-up in home buying demand from extremely depressed levels in the wake of now-expired federal tax credits. Homebuyers rushing for up to $8,000 in tax incentives had to sign contracts by April 30, which fired up spring sales at the expense of summer transactions.

Sales of new homes surged in June, yet posted the second lowest level in 47 years of record keeping, the Commerce Department said on Monday. The weakest level was set in May on the heels of the credit’s expiration. “It’s just an indication that demand for housing at the moment is very weak given that the incentives have just come off,” said Bob Baur, chief global economist at Principal Global Investors in Des Moines, Iowa. Housing is bottoming now, fighting strong headwinds created by unemployment flirting with 10 %, he said. “Consumers are clearly worried about economic growth that is seen to be faltering somewhat,” said Baur, who thinks chances of a double-dip recession are slim.