Mort­gage ap­pli­ca­tions de­cline to a four-year low

USA TODAY International Edition - - MONEY - Janna Her­ron

Many po­ten­tial home­buy­ers are sit­ting out the hous­ing mar­ket.

The vol­ume of mort­gage ap­pli­ca­tions last week fell to the low­est level since De­cem­ber 2014, ac­cord­ing to a new re­port from the Mort­gage Bankers As­so­ci­a­tion, pro­vid­ing an­other sign the hous­ing mar­ket is slow­ing.

The de­cline was led by a 5 per­cent drop-off in pur­chase ap­pli­ca­tions to a nearly two-year low, fol­lowed by a 3 per­cent de­crease in ap­pli­ca­tions to refinance an ex­ist­ing loan.

Buy­ers are fac­ing a tri­fecta of un­friendly hous­ing con­di­tions: short sup­ply of homes, in­creas­ing prices and ris­ing mort­gage rates. The rate on the 30year fixed-rate mort­gage – the most com­mon home loan among buy­ers – hit 5.15 per­cent last week, the high­est level in more than eight years, ac­cord­ing to the MBA.

“That means they qual­ify for less” in a com­pet­i­tive hous­ing mar­ket, says Pava Leyrer, chief op­er­at­ing officer of North­ern Mort­gage Ser­vices in Michi­gan.

Strug­gling buy­ers still in the mar­ket are tak­ing what­ever house they can get given the tight in­ven­tory, she says. “Some houses I wouldn’t touch with a 10-foot pole,” Leyrer says.

The time for refinanc­ing into a lower rate also is long gone for most home­own­ers, thanks to higher rates. The share of refinances fell to 39.1 per­cent of to­tal ap­pli­ca­tions from 39.4 per­cent the pre­vi­ous week.

If home­own­ers do refinance, many are pulling out cash to make home im­prove­ments or pay off credit-card debt, says Scott Shel­don, branch man­ager of New Amer­i­can Fund­ing in Cal­i­for­nia. In­ter­est rates on credit cards are in­creas­ing as the Fed­eral Re­serve hikes rates.

“The pay­ments on those things are painful,” Shel­don says, “but if you can wrap it all into fixed-rate loan, for a lot of fam­i­lies, that’s a smart finan­cial de­ci­sion.”

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