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Mortgage requests decline again


U.S. mortgage applications fell for a second week as the highest mortgage rates in two months resulted in fewer home purchases and less refinancing, a private group's survey released Wednesday showed.

The Mortgage Bankers Association's applications index declined 5.8 percent to 673.3 from 715 in the prior week. The group's gauge of mortgage refinancing fell 12.3 percent to 1,912.3, the lowest since the end of August, from 2,179.3.

Home purchases dropped 0.6 percent, bringing the index to 460.3, close to the record of 501.6. Signs of stronger economic growth and forecasts that Federal Reserve policy-makers will keep raising their benchmark interest rate, the federal funds rate, are pushing up mortgage rates.

"The housing market is going to stay strong for a long time, but we've already reached the high-water mark," said Ken Mayland, president of ClearView Economics LLC in Pepper Pike, Ohio. "It's not so much a matter of mortgage rates anymore. It's more a matter of the pent-up demand for housing being satisfied."

David Lereah, chief economist of the National Association of Realtors, predicted home sales will decline next year for the first time since 1999. For now, the residential market remains very strong, he said.

Housing starts reached their highest level of the year in October. New-home sales during the month were the third-highest on record and sales of existing homes were the fourth-highest.

The National Association of Realtors, the U.S. industry's largest trade group, estimates that previously owned home sales will reach a record 6.54 million and new-home sales will reach an all-time high of 1.17 million this year.

"This is a reasonably good situation because mortgage rates go up when the economy is strong, but their impact is likely to be offset by more job creation and consumer confidence, which are positives for the housing market," said Ara Hovnanian, president and chief executive officer of Hovnanian Enterprises Inc., the largest homebuilder in New Jersey.

Refinancing's share of total applications fell for a third straight week, decreasing to 46.4 percent last week from 48.4 percent.

"What we're seeing now is a broadening of economic growth," said Robert Mellman, an economist with J.P. Morgan Securities Inc. in New York. "The biggest [challenge] to housing is a strong economy that holds mortgage rates up and that's what we're moving toward."

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