Applications to buy and refinance homes dropped last week, an industry trade group said yesterday, the latest sign that United States (U.S.) housing remains mired in a downturn.The Mortgage Bankers Association's mortgage application index slid 3.4 per cent to a seasonally adjusted 643.7 in the week ended June 15.
The drop in applications piled on to reports from the country's builders and the government this week suggesting any sustained housing rebound could be next year's business.
"We're not through with this correction," said Gregory Miller, chief economist at SunTrust Banks Inc. in Atlanta.
"Prices have to drop as much as 8.0 per cent, depending on the house type and location, to pare an unusually large supply of unsold homes lingering on the market," he said.
Absolute necessity
"If new supply is priced initially significantly lower than existing homes of the same rough quality, then maybe they don't have to come down," said Miller.
"But price correction is an absolute necessity, affordability got way out of hand."
Housing starts fell more than 2.0 per cent in May as builders grappled with a stockpile of unsold homes, the Commerce Department said on Tuesday.
Sentiment among home builders sank to its weakest level this month in more than 16 years, based on an index reported on Monday by the National Association of Home Builders.
The group expects building and sales will keep eroding until late this year before starting to recover in 2008.