Mortgage applications drop

This week’s MBA mortgage application index provided yet more proof that troubles in the housing market are far from over. Applications fell 3.9% to a four-month low, as higher interest rates and increased inventories scared off buyers. The purchase index dropped 4.9%, and the refinancing index was down 2.5% at its lowest level for this year.

It’s now mid-2007 and no signs of improvement are to be seen. The housing slump seems to be getting much more serious than expected, and economists believe it may well extend until the end of the year and beyond. Furthermore, sales and prices are dropping, but yet inventories aren’t moving. Lennar Corp., the largest U.S. homebuilder, reported financial losses for the quarter ended May 31, and observed a drop of 31% in new orders. As long as inventories stay on the market, home builders will continue to suffer losses, but buyer activity is still relatively low, and things may get worse when the “active” summer season ends.

…We’ll be anticipating the Fed’s statement…