US home loan applications declined last week despite the lowest mortgage rates in more than three months, said the Mortgage Bankers Association, suggesting a long haul before the housing market recovers.
Rough winter weather has likely tapered off the demand, but high unemployment and underemployment rates are greatly affecting the housing market even with the federal tax incentives.
The industry groups’ market index, including purchase and refinance applications, dropped 1.9 percent seasonally adjusted to a three-week low amid improving borrowing costs.
The average 30-year mortgage rates also dropped 0.10 point to 4.91 percent from a recent peak of 5.18 percent at the start of the year.
Housing market is "bouncing along a somewhat jagged bottom" following a three-year decline, said Keith Hembre, chief economist at First American Funds in Minneapolis.
Permits to build decreased for a second straight month and groundbreaking for new homes dropped in February. The market still faces more foreclosed properties which made housing recovery in the US improbable.
The US Federal Reserves noted that "housing starts have been flat at a depressed level."
The housing crisis, which dragged the country into the recession, is also one of the primary reasons why the Fed reaffirmed its commitment to keep interest rates at a lower level for an extended period.
MBA’s index of refinancing applications declined 1.7 percent last week and the purchase loan demand index also dropped 2.3 percent.
After a peak of demand in 2009, "the continuation of the tax credit was supposed to spur continued sales into 2010 and it just doesn’t seem at this point to have done that," said of the Massachusetts Credit Union League.
The harsh weather across the US is partly blamed for the slow sales, and spring season in the coming months usually means more home shopping.