Florida Mortgage Applications Down 5.5 Percent

Florida mortgage applications fell last week after surging by the most since June 2005, as sales declined and fewer homeowners refinanced. The index of applications to buy a home or refinance an existing Florida home loan dropped 5.5 percent, the most since June.

Purchases in the U.S. as a whole remained close to a three-year low, with the recent declines in prices and mortgage rates not enough to rekindle demand to 2001-2005 levels. The slump in real estate after five record years will keep subtracting from the U.S. gross domestic product through early next year, economists believe.

However, on a more encouraging note, less expensive Florida mortgage loans, cheaper homes and a dearth of builder incentives may still ensure the housing market slows gradually and avoids an outright collapse in the state.

At last week’s market rates, the monthly principal and interest costs for each $100,000 of a Florida home loan would be $617. A year ago, when the rate was 5.98 percent, the payment was $598.

The Federal Reserve policy makers are counting on a gradual slowdown in the U.S. housing market to help slow the economy and contain inflation. So far, they’ve expressed varying degrees of concern.

Chairman Ben S. Bernanke said last week that the housing market is in a “substantial correction” that’ll take away from growth this year and restrain the expansion in 2007.

Federal Reserve Bank of Dallas President Richard Fisher said yesterday that “it is important not to over-fixate on housing, because the rest of the economy is running on all pistons.”

Former Fed Chairman Alan Greenspan even weighed in, saying a turnaround may be at hand. “We are beginning to see some evidence that all the data are not going south,” he told an audience of insurance-industry executives yesterday in White Sulphur Springs, W.V.

The decline in mortgage applications was only the second in the past six weeks. The measure fell from the prior week’s 633.9, which was the second- highest level this year.

The gauge of purchase applications declined last week and has fallen 18 percent from the same time last year. Meanwhile, refinance activity dropped 5.8 percent last week, and is down 37 percent from last year’s peak levels reached in the week ending June 10, 2005.

Residential construction, home sales, and related purchases such as new furnishings and renovations, together account for as much as 23 percent of gross domestic product, according to the Joint Center for Housing Studies at Harvard University.

Sales of new and existing homes probably will fall 9.4 percent in 2006 from a record last year, according to Freddie Mac, the second-largest mortgage company in the world. The McLean, Virginia-based mortgage buyer predicted a 7.9 percent decline a month ago.

Throughout the nation, home builders are suffering, too. D.R. Horton Inc., the second-largest U.S. builder, said its fiscal fourth-quarter orders plunged 34 percent as home buyers canceled planned purchases.

Other mortgage rates edged up last week as well. The average rate on a 15-year fixed Florida mortgage increased to 5.90 percent last week from 5.86 percent the prior week, while the one-year adjustable-mortgage crept up to 5.88 percent from 5.86 percent, the report showed.

The Mortgage Bankers Association survey, compiled every week since 1990, covers about half of all U.S. retail residential mortgage originations.