Mortgage applications in the short Labor Day week tumbled 13.5% from a week earlier, with refinance volume falling the most, by 20%, giving lenders more bad news as they adjust to the slowdown.
The Mortgage Bankers Association, which released the data Wednesday morning for the week ending Sept. 6, said its Refinance Index has fallen 71% from its recent peak in the week ending May 3. It's at its lowest level since June 2009.
Home purchases are still up in single digits from a year ago but volume growth has slowed. Seasonally adjusted, purchase volume fell 3% from the week earlier, the MBA said.
Rising interest rates since May have impacted loan demand for both refis and purchases. The average interest rate for a 30-year fixed-rate mortgage rose to 4.80% last week from 4.73% the prior week, the MBA said.
Bank of America (BAC) plans to cut more than 2,000 more jobs in the face of lower refi demand while Wells Fargo (WFC) and JPMorgan Chase (JPM) are bracing for a stiff fallout in volumes in the second half of the year.
Wells warned this week that third-quarter originations could fall nearly 30% while JPMorgan said loan volume could fall as much as 40% in the second half of the year vs. the first half.
Big-bank and builder stocks were little changed Wednesday morning. But builders such as DR Horton (DHI), PulteGroup (PHM) and Lennar (LEN) got a sharp lift on Monday after Hovnanian (HOV) reported a decent quarter and said it would likely post its first profitable year since 2006.
Hovnanian's CEO commented that consumers' hesitancy in the face of higher interest rates will be a "temporary bump" in the housing recovery road.
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