New U.S. mortgage applications fell sharply last week, despite mortgage rates falling for the first time since early March, an industry trade group said on Wednesday.
The Mortgage Bankers Association said its seasonally adjusted market index, a measure of weekly mortgage activity, declined for the week ending May 14 by 11.9 percent to 654.1 from the previous week's 742.2. This was the lowest level since 599.9 touched in the first week of January
Average 30-year mortgage rates, excluding fees, fell by 11 basis points to 6.21 percent. Last week's average 30-year rates were up 104 basis points from the comparable week a year ago.
Mortgage rates have trended higher since mid-March with rising Treasury yields as data suggested faster U.S. economic growth and growing inflationary pressure. Higher mortgage rates have curtailed refinancing activities, but home sales and construction have yet to show signs of dropping off.
After a protracted rise, Treasury yields fell late last week on a wave of bargain-hunting.
The Washington trade group's purchase index, a gauge of new loan requests for home purchases fell by 8.1 percent to 454.2 after hitting its second highest ever level at 494.3 the previous week. Its all-time high was 501.6 reported for the Jan. 16 week.
Housing activities, while cooled a bit in April, have been hovering near their historical high levels.
On Tuesday, the government reported that home construction last month fell by 2.1 percent to an annualized rate of 1.969 million units, a touch less than analysts forecasts. But the April level of housing starts suggested that home demand will unlikely shrink much any time soon, according to analysts.
On Monday, the National Association of Home Builders said its housing index, a measure of builder sentiment on sales and buyer traffic, was at 69 for May, unchanged from April.
An index reading greater than 50 means that more builders view sales conditions as good, rather than poor.
The MBA's refinancing index fell last week by 16.8 percent to 1,816.9 from previous week's 2,184.6. The refinancing index was at its lowest level since the first week of January when it was at 1,755.4.
Rising rates have discouraged homeowners from refinancing, but an improving economy and more jobs should counter the effect of higher borrowing costs on home sales, analysts said.
"The economy is getting better, and this will offset much of the negative impact of higher rates," David Berson, Fannie Mae's chief economist said on Tuesday after the April housing starts data.