The Mortgage Bankers Association reported today that applications for home loans fell for the second time in a row last week by more than 4%. The industry group's market composite index decreased by 4.6% compared the the previous seven-day period. This marks the ninth time in 10 weeks that the index has dropped. It remains off its May high by more than 50%.
The one piece of good news was that applications for purchase-money mortgages increased over the last week -- these are home loans related to the purchase of a house as opposed to the refinancing of a previous mortgage. According to the MBA's data, which covers an estimated 75% of the mortgage market, the purchase-money index climbed by 1% on a sequential basis, and is now 2.9% higher than the same week last year.
Meanwhile, the volume of applications to refinance continues to plummet. On a week-over-week basis, the MBA's refinance index fell by 8%. It's now down by 62% from the high in early May.
The overall decline is bad news for banks like Wells Fargo (NYSE:WFC) and JPMorgan Chase (NYSE:JPM), both of which look to the mortgage market for a considerable amount of revenue. For its part, Wells Fargo has notched seven quarters in a row in which it originated more than $100 billion in home loans, making it the largest mortgage originator in the country. JPMorgan, which is the second largest originator, saw volume last month come in at $53 billion.
Shares of these companies are off this afternoon by 0.75% and 1.04%, respectively.
The news is also a disappointment for homebuilders like D.R. Horton (NYSE:DHI). The Texas-based company is the largest builder in the country and has been gaining momentum over the last year. In the three months ended June 30, the number of home closings increased by 30% compared to the same time period in 2012. If mortgage applications volumes tail off, however, it won't be a good sign for D.R. Horton or other members of its industry.
Shares of D.R. Horton are up by 0.45% at the time of writing.
John Maxfield has no position in any stocks mentioned. The Motley Fool recommends Wells Fargo. The Motley Fool owns shares of JPMorgan Chase and Wells Fargo. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.