Mortgage application activity fell 2.7% in the week ending June 24, even as mortgage rates declined to their lowest level since the middle of November. 

The Mortgage Bankers Association (MBA) reported that the Refinance Index declined 2.6% to ~2607, while the Purchase Index slipped 3% to ~181.

In the traditional home buying season and with record affordability, purchase activity is at its lowest since late February. 

Tight underwriting, higher fees, conservative appraisals, continuing declines in home prices, along with the weak jobs market are responsible. 

In terms of home prices, yesterday Standard & Poor's Case-Shiller reported that its Home Price Index rose 0.8% and 0.7%, respectively, in April for the 10- and 20-City Composites — its first increase in eight months.

Barclays Capital analysts expected home prices to turn positive in the summer months before slipping again in the winter with prices reaching a trough in Q1 2012.  They added that some positive prints could help market sentiment.

The 30-year fixed rate contract rate averaged 4.46%, down 11 basis points from the prior week.  Rate levels are considered to be in a "no man's land" at the moment. 

The 5% coupons have had plenty of opportunity to refinance, while rates have not declined enough to draw in the 4.5% coupon. 

A decline closer to 4% is what analysts said is needed to stimulate refinancing activity to the 4000-5000 area seen in late summer and into fall of last year.

As a percent of total applications, refinance share increased slightly to 69.5% from 69.2%. ARM share was slightly lower to 5.8% from 5.9%.

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