The talk of a bottom in the housing market seems to be just that ... talk.

Mortgage applications fell to a seven-month low for the week ended June 26, according to data from the Mortgage Bankers Association.

The Market Composite index, which measures applications for new mortgages and the refinancing of existing loans, plunged 19 percent to 444.8. On an unadjusted basis, the index fell 18.5 percent compared with the previous week and 7.4 percent year-over-year.
"The worst is behind us but we're a long ways off from a recovery in housing," Mark Vitner, a senior economist at Wachovia Corp. told Bloomberg News. "Inventories are still elevated. We're not expecting any strength in housing until the second half of 2010."

Rising mortgage rates are depressing demand for refinancing and rising foreclosure rates are adding to the glut of unsold inventories. Some data is indicating that the housing market is improving, though markets in hard-hit states such as California and Florida continue to struggle.

The housing market may turn worse as unemployment tops 10 percent, as many economists predict it will by the end of the summer. Also, many of the homeowners whose mortgages have been modified because they can't make their payments likely will fall behind again based on past data.

The 30-year fixed-rate mortgages that homeowners are paying dipped slightly to 5.34 percent from 5.44 percent, with points increasing to 1.12 from 0.99 (including the origination fee) for 80 percent loan-to-value (LTV) ratio loans. At the end of March, interest rates were 4.6 percent.

Though the decline in housing prices is slowing, supply of housing continues to outstrip demand. Any improvement in the housing market is going to be slow, and at times rocky.

Homeowners may have to wait years to recover the equity they have lost in their homes. The ranks of renters will swell for some time to come.

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