US mortgage applications dropped to their lowest level in nearly four years last week as rates continued to rise.
The Mortgage Bankers Association said Wednesday its weekly survey revealed a 4 per cent decline in applications for home loans compared to the prior week. The group’s market composite index settled at 316.2 on a seasonally adjusted basis, the lowest mark since December 2014.
A gauge of refinance applications also showed weakness, falling 3 per cent week over week. The MBA’s purchase index was down 5 per cent to record its lowest level in two years.
Home builders were laggards on a day of sharp gains for US stocks. Shares of Lennar and DR Horton were trading lower, and PulteGroup was roughly flat. The S&P 500 jumped 1.6 per cent in a market rally following US midterm elections.
The report offered another sign that demand in the US housing market has cooled in response to higher borrowing costs — coinciding with the Federal Reserve’s moves to tighten fiscal policy and raise its benchmark short-term rate. The central bank’s policy-setting board will conclude a two-day meeting Thursday when it is expected to leave rates unchanged. However, the Fed is expected to lift rates again in December.
The MBA survey’s average contract interest rate for 30-year fixed mortgages edged higher to 5.15 per cent from 5.11 per cent for the week ended November 2. It was the highest rate on record since April 2010.
“Rates increased slightly last week, as various job market indicators showed a bounce back in job gains and an acceleration in wage growth in October,” Joel Kan, the MBA’s associate vice-president of economic and industry forecasts, said in a statement.
Potential home buyers also face strong pricing at a time when available properties remain in short supply. The latest S&P Corelogic Case-Shiller index showed prices rising 5.8 per cent nationally in August year-over-year, though gains slowed compared to July.
Sales of new and previously owned homes slumped in September, according to data from the US Commerce Department and the National Association of Realtors. However, the supply of new homes on the market grew to the highest level since March 2011.