Traditional Home Loan, Refinancing Applications Decline For Week

Mortgage applications continued to fall last week, as the highest Florida home mortgage loan costs in more than four years discouraged Sunshine State residents from borrowing and refinancing.

The Mortgage Bankers Association said Wednesday that its national index of applications to buy a home or refinance an existing loan declined by 0.8 percent from the previous week. The group’s measure of refinancing fell, as well, declining 2.2 percent. The percentage of all loan applications used for refinancing purposes slipped to 35.5 last week from 35.7, and is down 43 percent from the same time last year.

This removal of cash used by homeowners to spend and power the economy has some economists worried. Meanwhile, Federal Reserve policymakers forecast that rising Florida home loan rates will further slow home purchasing.

“We’re seeing a cooling in housing market activity,” said Glenn Haberbush, an economist at Mizuho Securities USA Inc. in New York. “When we look at the nation as a whole, it does appear to be orderly.”

The index of purchases changed very little last week, but overall, they are down 22 percent from their June 2005 peak. The nation’s home builders are also feeling the heat as new construction declines across the U.S.

“It’s been a seller’s market, and it’s turning into a little more normal market where buyers have a little more power than they did over the last few years,” said Ara Hovnanian, CEO of Hovnanian Enterprises Inc., the largest builder in New Jersey.

Job and income growth are helping the housing market stave off an outright collapse. The Commerce Department reports that housing starts rose by 5 percent in May. This has most analysts predicting a soft landing for the market, in spite of borrowing costs that continually rise as the Fed looks to extend a series of 16 interest rate increases dating back to June 2004.