Complete Property Market Updates of Singapore

March 30, 2008

Mortgage applications index slides by 2.9% last week

Filed under: General — Propertymarketupdates @ 2:56 pm

Mortgage applications in the US decreased for the fifth time in the last six weeks, led by a slump in refinancing.

The Mortgage Bankers Association’s index of applications to buy a home or refinance a loan fell 2.9 per cent last week to 652, the lowest level of the year, from 671.1 a week earlier. The group’s refinancing gauge dropped 4.6 per cent, while the purchase index declined one per cent.

Filings weakened even as rates on fixed mortgages fell, signalling that lending restrictions and the prospect of bigger declines in property values are keeping potential homeowners away. Federal Reserve policymakers are struggling to prevent the real estate slump, now in its third year, from tipping the economy into a recession.

Housing ‘is going to remain very weak’, Ryan Sweet, an economist at Moody’s in West Chester, Pennsylvania, said before the report. ‘House prices are going to decline across the country, banks are tightening lending standards and all these factors are going to continue to weigh on housing.’

The bankers group’s refinancing index decreased to 2,335, also the lowest level in 2008, from 2,448.2. The purchase measure fell to 365 from 368.8 the prior week. The purchase index reached an almost five-year low of 357.6 in mid February.

Yesterday’s report showed that the share of applications for refinancing declined to 49.7 per cent from 50.6 per cent the prior week.

The average rate on a 30-year fixed-rate loan fell to 5.98 per cent from a five-month high of 6.37 per cent the prior week. The payment on every US$100,000 borrowed at the current rate would be US$598.27 a month.

The average rate on a 15-year fixed mortgage decreased to 5.24 per cent from 5.72 per cent, the Mortgage Bankers Association said yesterday. The rate on a one-year adjustable-rate mortgage jumped to 6.95 per cent, the highest since December 2000, from 6.72 per cent.

Declines in construction, which have subtracted from growth for eight consecutive quarters, may continue. The Commerce Department said on Tuesday that housing starts dropped in February and building permits, a sign of future building, fell to the lowest level in more than 16 years.

The ‘deepening of the housing contraction’ was among the factors that Fed policymakers yesterday said were likely to continue to weigh on economic growth. The Federal Open Market Committee cut its main lending rate by three-quarters of a percentage point to 2.25 per cent.

Homebuilders continue to lose money. WCI Communities Inc, a Florida homebuilder, reported its fifth straight quarterly loss on Monday. Revenue fell 63 per cent, net new orders dropped more than fourfold.

Florida had the third-highest foreclosure rate in the nation last month compared with a year ago, with one in every 254 households in some stage of default, according to Irvine, California-based RealtyTrac Inc. Nationwide, home foreclosures jumped 60 per cent and bank seizures more than doubled from February 2006, RealtyTrac said.

The Washington-based Mortgage Bankers Association’s loan survey, compiled every week since 1990, covers about half of all US retail residential mortgage originations. — Bloomberg

Source : Business Times – 20 Mar 2008


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