The Mortgage Bankers Association reported today that applications for home loans fell last week by the largest margin in six weeks. The industry group's market composite index decreased by 4.7% compared to the previous seven-day period. This marks the eighth time in nine weeks that the index has dropped. It is now off its May high by 53%.
In a downbeat sign for the housing market, last week's decline was led by a fall in purchase-money mortgages -- that is, home loans related to the purchase of a house as opposed to the refinancing of an existing mortgage. According to the MBA's data, which covers an estimated 75% of the mortgage market, the purchase-money index dropped by 5% on a sequential basis, though it remains 2.7% above the same week last year.
Meanwhile, refinance activity was not hit as hard. The MBA's refinance index dropped by 4% on a sequential basis and is now, thanks to the surge in interest rates over the last few months, 56% below the same week last year.
On the heels of this news, shares of the nation's largest homebuilders are trading lower. At the time of writing, D.R. Horton is down by 1.9%, Lennar by 1.8%, and PulteGroup by 1.8%. Suffice it to say, all of these companies rely on a robust mortgage market to fuel demand for new homes.
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