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November 3, 2010 11:30 AM EDT
The U.S. Mortgage Bankers' Association said on Wednesday applications for new loans last week plunged 5 percent on a seasonally adjusted basis from one week earlier, indicating that the housing market's woes are unabated.
The refinance index fell 6.4 percent from the previous week, the third straight week the index has dropped, while the seasonally adjusted purchase index rose 1.4 percent from a week earlier.
Mortgage applications had bounced back last week as demand for both purchases and refinancings rose, according to MBA data, which measures the change in the number of new mortgage applications during the week.
The U.S. property sector, which was the worst affected by the financial meltdown, is far from being out of the woods, with the federal government reporting recently that 1.9 million home loans are still underwater and that more than 4 million homeowners are delinquent on their loans.
Home foreclosure hit a record number in September with as many as 102,134 U.S. homes being repossessed by banks, the first time such repossessions have surpassed the 100,000 mark in a single month.
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Bank repossessions also hit a record high in the third quarter, with a total of 288,345 properties being repossessed by lenders, an increase of 7 percent from the previous quarter and an increase of 22 percent from the third quarter of 2009.
Analysts have also said the ongoing probe into documentation irregularities and the freezing of foreclosure activity by some banks could deal homeowners another blow.
Housing recovery has remained sluggish after the homeowner tax credit by the U.S. government expired in April. According to data released last week, sales of U.S. new homes increased 6.6 percent in September to a seasonally-adjusted annualized rate of 307,000.
However, analysts have pointed out that the rise was still 25 percent below April's peak, showing sales haven’t picked up despite the interest rates hovering near record lows.
Data showed last week existing home sales were stronger than new home sales. They rose 10 percent in September, while analysts were expecting a modest rise of 4.1 percent.
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