WASHINGTON - U.S. mortgage applications sank for a fifth straight week to a fresh 13-year low, the Mortgage Bankers Association said yesterday, suggesting that federal tax credits had robbed more from future sales than expected.
Purchase volume declined 5.7 percent, and refinance volume tumbled 14.3 percent. The numbers are a sign the housing market is struggling without government incentives, which saw home buyers rushing to sign purchase contracts ahead of the April 30 deadline for up to $8,000 in federal tax credits.
"It's very worrying," said Paul Dales, U.S. economist at Capital Economics in Toronto.
Interest rates have hovered near historical lows for the past month. Despite the low rates, Michael Fratantoni, MBA's vice president of research and economics, noted several factors that are preventing another refinancing boom.
Many homeowners have already refinanced, while others remain under water on their mortgages, have uncertain job situations, or have damaged credit and therefore may not qualify to refinance, he said.
The trade group said customers looking to refinance homes accounted for 72.2 percent of all applications, compared with 73.8 percent the previous week. This marks the first decline in refinance share in five weeks.
The average interest rate on a 30-year, fixed-rate mortgage fell to 4.81 percent last week from 4.83 percent a week earlier. The average rate for a 15-year, fixed-rate mortgage - often more popular for refinancing - rose to 4.26 percent from 4.24 percent.
"We have to face the unfortunate fact that the housing market really isn't out of the woods yet," Dales said. "At a time when the economic recovery is still looking fairly fragile it won't be a good thing if people are moving less and spending less on buying new durable goods like fridges and sofas."
There is no political will to reinstate the tax credit, housing experts agree.