Home-Purchase Index in U.S. Plunges to Lowest Level Since 2000

By Bob Willis

Nov. 12 (Bloomberg) -- Mortgage applications to purchase homes in the U.S. plunged last week to the lowest level in almost nine years as Americans waited for the outcome of deliberations to extend a government tax credit.
The Mortgage Bankers Association’s index of applications to buy a house dropped 12 percent in the week ended Nov. 6 to 220.9, the lowest level since Dec. 2000. The group’s refinancing gauge rose 11 percent as interest rates decreased, pushing the overall index up 3.2 percent.
The drop in buying plans points to the risk that the recent stabilization in housing will unravel without government help. In a bid to sustain the recovery, Congress passed and the administration signed a bill last week to extend jobless benefits and incentives for first-time homebuyers, adding a provision that also made funds available to current owners.
“Uncertainty over the housing tax credit sent some tremors through the market in recent weeks,” Michael Larson, a housing analyst at Weiss Research in Jupiter, Florida, said before the report. “But now that Congress has extended and expanded the credit, we should see demand pick back up.”
The MBA’s overall index climbed to 627.5 last week from 608.3, the banking group reported today in Washington. Its refinancing gauge increased to 2998.2 from 2693.7.
The share of applicants seeking to refinance loans rose to 71.5 percent of all applications, the highest level since May, from 66.1 percent a week earlier.
Rates Fall
The average rate on a 30-year fixed-rate loan fell to 4.90 percent last week from 4.97 percent two weeks ago. The rate reached 4.61 percent at the end of March, the lowest level since the group’s records began in 1990.
At the current 30-year rate, monthly borrowing costs for each $100,000 of a loan would be $530.73, or about $84 less than the same week a year earlier, when the rate was 6.24 percent.
The average rate on a 15-year fixed mortgage decreased to 4.33 percent from 4.34 percent the prior week. The rate on a one-year adjustable mortgage increased to 6.85 percent from 6.83 percent.
Combined sales of new and existing homes were up 24 percent in September from the lowest level in at least a decade in January, helping pull the market out of its worst slump in seven decades.
Rising demand, in turn, has helped stabilize home values and construction.
More Orders
Toll Brothers Inc., the largest U.S. luxury homebuilder, yesterday said orders surged 42 percent in the fiscal fourth quarter, cancellations slowed and revenue beat analysts’ estimates.
“The improvement in consumer confidence over the past year, the increasing stabilization of home prices, the decline in unsold home inventories and the reduction in buyer cancellation rates suggest that the new home market should be improving,” Chief Executive Officer Robert Toll said in a statement. “We sense that it is, though slowly and through choppy waters.”
President Barack Obama on Nov. 6 signed into law the first major expansion of February’s stimulus plan, pushing the deadline for first-time buyers to close on a transaction out to April 30 from Nov. 30. The credit is worth of up to $8,000. The measure also added buyers who have owned a home for at least five years, making them eligible for a credit of up to $6,500.
The Washington-based Mortgage Bankers Association’s loan survey, compiled every week, covers about half of all U.S. retail residential mortgage originations.
To contact the reporter on this story: Bob Willis in Washington at bwillis@bloomberg.net