U.S. mortgage applications fell for a fourth straight week, reflecting the inability of many homeowners to take advantage of record low interest rates, data from an industry group showed on Wednesday.
Demand for loans to purchase a home, however, rose for the first time in three weeks, offering a glimmer of hope for a housing market that is struggling to stand on its own without government support.
The Mortgage Bankers Association on Wednesday said its seasonally adjusted index of mortgage applications, which includes both purchase and refinance loans, for the week ended Sept. 24 decreased 0.8%. The four-week moving average of mortgage applications, which smoothes the volatile weekly figures, was down 3.3%.
The MBA's seasonally adjusted purchase index, a tentative early indicator of home sales, increased 2.4%.
Jim Gillespie, CEO of Coldwell Banker Real Estate LLC. in Parsippany, New Jersey, said the weak labor market has kept many potential home buyers sidelined.
"They have been showing up for open houses, but are not ready to make a purchase," he said. "There is a lot of pent up demand, but the housing market will not pick up steam until unemployment decreases and the economy picks up steam."
"It does not matter how low interest rates on mortgages are, if you do not have a job or fear you may lose your job, you are not going to buy a home," he said.
Borrowing costs on 30-year fixed-rate mortgages, excluding fees, averaged 4.38%, down 0.06 percentage point from the previous week. That is a lowest level in the survey, which has been conducted weekly since 1990.
Interest rates were also below their year-ago level of 4.94%.
Meanwhile, after climbing throughout most of the summer, demand for home refinancing loans has fallen throughout September. The MBA's seasonally adjusted index of refinancing applications decreased 1.6%.
The drop-off in home loan refinancing demand does not bode well for the flailing U.S. economy as this activity typically encourages an increase in consumer spending.
By lowering monthly mortgage payments, lower rates may also help some homeowners avoid default and foreclosure if their credit is good enough.
The housing market has been struggling since the April 30 expiration of popular home buyer tax credits. To take advantage of the tax credits, buyers had to sign purchase contracts by April 30. Contracts originally had to close by June 30, but that was extended by three months.
Gillespie said "underwater" mortgages — where the amount owed on the mortgage exceeds the value of the home — are one of the biggest banes of the homeowners.
This negative equity makes many of them unqualified for home loan refinancing and prevents some from selling.
"If you are secure in your job this is the absolute best time to purchase a home because affordability is at an all-time high and interest rates are at all time low," he said.
The MBA said fixed 15-year mortgage rates averaged 3.77%, down from the previous week's 3.88%, a record low. Rates on one-year adjustable-rate mortgage, or ARMs, increased to 7.04% from 6.96%.