Falling Loan Applications Tilt Toward Still-Nascent Recovery

In signs that a stable housing rebound may still be ways off, mortgage applications contracted by 1.2 percent last week, even while the Home Affordable Refinance Program (HARP) offered a still-steady buttress for refinance activity.

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The ""Mortgage Bankers Association"":http://www.mbaa.org/default.htm (MBA) found in a weekly survey that mortgage application volume also declined by 10.2 percent on a seasonally adjusted basis.

The Purchase Index went up by a seasonally adjusted 2.1 percent from last week, while it climbed by 14.7 percent on a seasonally unadjusted basis.

The four-week moving average dipped by 1.77 percent for the seasonally adjusted Market Index, 0.47 for the seasonally adjusted Purchase Index, and 2.04 percent for the Refinance Index.

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""Paul Diggle"":http://www.capitaleconomics.com/staff/property-economics/paul-diggle.html, a property economist with consultancy ""Capital Economics"":http://www.capitaleconomics.com/, wrote in a note that ""the continued weakness of mortgage applications highlights that there is little chance of significant and sustained house price gains.""

Refinance share of mortgage activity plummeted to 77 percent from last week ├â┬ó├óÔÇÜ┬¼├óÔé¼┼ô the lowest since December last year. Adjustable-rate mortgages scaled up to 5.4 percent from 5 percent of total volume from the week before.

He attributed a 9.7-percent rise month-over-month in refinance applications to ""the expanded HARP refinancing scheme"" as government officials continue to deploy broad refi opportunities for the market.

The Obama administration announced earlier Tuesday that the ""Federal Housing Administration"":http://portal.hud.gov/hudportal/HUD?src=/program_offices/housing/fhahistory (FHA) would slash refinance premiums to 0.1 percent, estimating that the revisions could impact anywhere from 2 million to 3 million borrowers who refinance their government-backed mortgages.

The Capital Economics note coincided with a ""CoreLogic"":http://www.corelogic.com/ index that found prices falling 3.1 percent year-over-year and 1.1 percent in January, which Diggle deflected with analysis that suggests prices rose 0.9 percent month-over-month in lieu of normal seasonal variations.

Suggesting that market conditions may keep a hold on the still-nascent recovery, the MBA said that interest rates for fixed-rate mortgages largely remained flat last week, with a marginal decline for the 30-year loan and a slight increase for FHA-insured loans.