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US mortgage applications up but housing mired in slump ReutersWed Jul 18, 2007 10:49 AM ET By Lynn Adler NEW YORK, July 18 (Reuters) - U.S. mortgage applications rose slightly last week driven by a jump in refinancing demand that overshadowed a drop in requests for loans to buy houses, an industry group said on Wednesday.A separate government report on Wednesday showed permits to build homes slid to a decade low rate in June, adding to evidence portending an extended housing slump. The past week's wave of refinancing applications is a short-lived blip caused by borrowers rushing in before mortgage interest rates headed higher, some industry experts said. "Rates really spiked up in June," before edging down this month, said Bob Moulton, president of Americana Mortgage Group in Manhasset, New York. "When rates go up like that it puts a sense of urgency into people who are thinking of refinancing who may have been on the fence." The Mortgage Bankers Association said on Wednesday its home loan application index climbed 0.9 percent to a seasonally adjusted 631.6 in the week ended July 13. However, the four-week moving average of mortgage applications, which smooths for volatility, fell for the eighth straight week and posted a 0.5 percent drop in the latest week, according to MBA data. The refinancing applications index increased 4.9 percent to a seasonally adjusted 1,717.4, more than offsetting the 1.6 percent drop in the purchase index to 446.5 in the week ending last Friday, the MBA said. The refinancing and purchase indexes also fell on a four-week moving average basis. LONGER HOUSING SLOWDOWN Federal Reserve Chairman Ben Bernanke on Wednesday told Congress that the U.S. housing slowdown may last longer than anticipated, damping economic growth. The ripple effects of rising delinquencies, such as economic and social distress for homeowners and communities, will likely get worse before getting better, he said. Signaling further weakness in the ailing housing market, the Commerce Department reported Wednesday that building permit activity, a sign of future construction plans, sank to its lowest rate in 10 years. "I think we still have six to 12 months to shake this housing issue out," Moulton said. "There's a lot of inventory out there, builders aren't really building more houses until they get rid of the ones that they've already built." A stronger-than-expected rise in June housing starts was tempered by a deep downward revision for May, he added. For details on the starts and permits report, see [ID:nN18365067]. DEEPER PRICE CUTS On Tuesday, the National Association of Home Builders said U.S. home builder sentiment this month fell to its lowest level in about 16-1/2 years. Builders are still grappling with huge stockpiles of unsold homes, even after months of slicing prices and throwing in incentives to sweeten the deals. "(Mortgage) rates will remain fairly stable for the rest of the year, which is good," Moulton said. "But with all the inventory out there it is going to take some time. You're going to see some significant price concessions." Average borrowing costs on 30-year fixed-rate mortgages, excluding fees, dropped 0.04 percentage point to 6.61 percent, the MBA said. The prior week's 6.65 percent rate was the highest since 6.69 percent in July 2006. Long-term mortgage rates since early June have been hovering around their highest rates since last summer, according to the MBA, crimping affordability at a time when lenders are also making it more difficult for buyers to get mortgages approved.
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