Mortgage Applications

Mortgage applications for U.S. home purchases have tumbled 17 percent since May on a seasonally adjusted basis and are down 6.9 percent from the same time a year ago. Demand has “softened considerably,” Joshua Shapiro, chief U.S. economist for Maria Fiorini Ramirez Inc., wrote in a note yesterday.

Capital Economics Ltd. last month lowered its 2014 home- sales forecast to 5.2 million from 5.4 million after U.S. pending residential sales for September slumped 5.6 percent, the fourth straight monthly decline. The firm predicts prices will rise 4 percent next year, half of this year’s projected gain.

“The sharp drop in pending home sales last month suggests that the steady rise in mortgage interest rates has hit sales activity harder than we had thought,” Paul Diggle, London-based property economist at the firm, wrote on Oct. 31.

Reduced demand in Western states that were at the forefront of the rebound could return the country to a more normal balance between buyers and sellers after an inventory shortage sent values surging. Nevada, California and Arizona had the biggest year-over-year price increases in the country in September, at 25 percent, 23 percent and 15 percent, respectively, according to CoreLogic Inc., compared with a 12 percent rise across the U.S.. The gains are a lagging indicator because they’re based on contracts signed months earlier.

Negative Equity

A reduction in homeowners in negative equity, which had been limiting sales in markets hard hit by the housing crash, has enabled more people to list properties. More than 2.5 million homes returned to positive equity, where the property is worth more than what’s owed, in the three months through June as prices gained, according to Irvine, California-based CoreLogic.

The U.S. supply of homes increased to 5 months in September, from 4.9 months a month earlier and an eight-year low of 4.3 months in January. A six-month inventory is considered equilibrium between buyers and sellers.

Biggest Gainers

Prices for single-family homes climbed in 88 percent of metropolitan areas in the third quarter, according to the National Association of Realtors. Among the areas with the biggest gains were Sacramento, where prices jumped 41.8 percent; Las Vegas and Punta Gorda, Florida, which each had a 31.9 percent gain; and Los Angeles and Phoenix, with increases of about 25 percent, the group said. All of these cities are seeing the number of homes available for sale expand.