Looking for home sales to increase? Don't hold your breath
Last week's news that July home sales were in the tank sent the Dow Jones industrial average below the 10,000 benchmark over worries the economy is heading toward the second plunge of a double-dip recession.
Don't expect the sales numbers to improve for August and September, a mortgage trade group said Wednesday.
In its weekly report on home-loan demand, the Mortgage Bankers Assn. said it tallied 37% fewer applications last week for loans to purchase housing than it had a year earlier.
The purchase applications were down 0.4% from the previous week, although the MBA said that after adjusting for seasonal factors they were up by 1.8%.
No matter how finely you slice the data, demand for home-purchase loans is sluggish, especially since interest rates continue to set record lows.
The MBA said the average contract rate for 30-year fixed mortgages with 20% down payments fell to 4.43% from 4.55% last week. (Borrowers may have been spending more to "buy down" their rates; upfront payments to lenders, including origination fees, increased from an average 0.89% of the loan amount to 1.34%.)
Michael Fratantoni, MBA's vice president of research and economics, said the housing market remains "exceptionally weak." His quote from the news release Wednesday:
"The sharp decline in MBA's Purchase Application index in May had provided a clear leading indicator of the drops in new and existing home sales that were reported for June and July. Despite the slight increase in purchase activity in the past week, the continued low level of purchase applications indicates we are unlikely to see an increase in new home sales reported for August or existing home sales reported for September."
The bright spot in the picture continues to be refinancings as homeowners seek to lower their rates and payments. An MBA refinance index increased 2.8% from the previous week, reaching its highest level since May 1, 2009.
-- E. Scott Reckard
Photo: A foreclosed and now bank owned house that is for sale. Credit: Getty.