WASHINGTON – Mortgage applications to purchase a home fell last week to a 15-year low, despite the lowest mortgage rates in decades.
Many potential buyers are holding off because they are worried about job security and fear the economy could slip back into another recession.
The Mortgage Bankers Association said Wednesday that an index measuring mortgage applications, which are adjusted for seasonal factors, fell 2.4 percent last week from the previous week. Home mortgage applications plunged 5.7 percent to its lowest level since December 1996.
"Another week of volatile markets and rampant uncertainty regarding the economy kept prospective homebuyers on the sidelines," said Mike Fratantoni, the trade group's vice president of research and economics.
The share of mortgage applications used for refinancing has risen to nearly 80 percent of the market, up from 70 percent just three weeks ago.
Few expect the lowest mortgage rates in decades to energize the depressed housing market. Over the past year, the average rate on the 30-year fixed mortgage has been below 5 percent for all but two weeks. Last week, it hit a four-decade low of 4.15 percent.
Yet sales remain unhealthy. Sales of new and previously occupied homes both fell in July. Sales of new homes are on pace to finish the year as the lowest on records dating back to 1963. The pace of re-sales is shaping up to be the worst in 14 years.
Home prices haven't fared much better. Since the peak of the housing boom in 2007, homes have lost nearly a third of their value.
The weak housing market has been a drag on the economy. And without more jobs, the housing market is unlikely to recover any time soon.
Roughly 14 million Americans are unemployed. The economy created just 117,000 net jobs in July, barely enough to keep up with the population growth. It needs to generate twice as many to make a noticeable dent in the unemployment rate, which was 9.1 percent last month.
The weekly survey covers more than half of all U.S. residential mortgage applications.