It seems that U.S. home loan demand is up for the first time in a month, as the Mortgage Bankers Association has announced that its seasonally adjusted index of home-refinancing applications jumped 10.6% to 1,499.4 for the week ended June 9, according to a report from Reuters.
The index – which stood at 2.967.4 just last year – factors in home purchases and refinancing of existing loans, and this rise implies that while the housing market will decline, the downturn will be gradual.
"Higher borrowing costs are likely to cause sales to fall after five record years, according to forecasts by the National Association of Realtors," Bloomberg News reports. "Purchases this year may still be the third-highest ever as job gains and income growth keep the market from a more pronounced slowdown, economists said."
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Meanwhile, experts insist that a spike in refinancing is to be expected in the lead-up to a Federal Reserve interest-rate meeting. "An increase in applications is typical ahead of a Fed meeting," MBA chief economist Douglas Duncan told Reuters. "There is a widespread belief that the Fed is going to raise rates again and that awareness had consumers looking to lock in a rate."
Economists at Merrill Lynch claim that housing has comprised as much as 50% of U.S. economic growth since 2001, but "housing will weigh on the economy this year as smaller price gains and higher interest rates curb refinancing, homebuilding and housing-related purchases and services," according to Bloomberg.
The news service conducted a survey and found that as refinancing wanes – generating less cash – consumer spending will take a hit, slowing to an average yearly rate of 3.2% for this year.
"Fed officials have gone out their way over the past two weeks to make clear that they will react to any sign of rising inflation with tighter monetary policy," Reuters reports. "And the latest report offered just the sort of signal that the central bank would like to avoid."
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