Mortgage Applications Drop to 6-1/2-Year Low

[Reuters]

Mortgage Applications Drop to 6-1/2-Year Low

By Reuters | 25 Jun 2008 | 07:04 AM ET

U.S. mortgage applications fell for a second consecutive week, hitting their lowest level in nearly 6-1/2 years despite a sharp drop in interest rates, an industry group said Wednesday.

The Mortgage Bankers Association said its seasonally adjusted index of mortgage applications for the week ended June 20, which includes both purchase and refinance loans, dropped 9.3 percent to 461.3 -- the lowest level since the week ended Dec. 28, 2001.

The report offers additional evidence of a U.S. housing market that is suffering one of the worst downturns in its history.

Significantly tighter lending standards and an unwieldy supply of homes for sale are some of the factors preventing the U.S. housing market from rebounding out of its two-year-long slump.

The frenzy of foreclosures hitting the market is aggravating matters adding to the supply of unsold homes and depressing home prices nationwide, analysts say.

The jump in foreclosure sales explains part of the sharp drop in home prices since foreclosures typically sell at about a 20-percent discount to the market, according to Michelle Meyer, an economist at Lehman Brothers in New York.
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