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) -- Mortgage applications fell for the third straight week even as mortgage rates remain near all-time lows.

Mortgage loan applications decreased 1.4% on a seasonally adjusted basis in the week ended Sept. 17, the Mortgage Bankers Association said Wednesday.

Refinancing applications decreased by 0.9% from the previous week, also the third consecutive week-over-week decline, while new home purchase loan applications decreased by 3.3%.

A total of 81.1% of all loan applications were for refinancing existing mortgages, up from 80.5% in the prior week.

Near-record-low mortgage rates have failed to spark demand for housing in recent months, but clearly had an effect on homeowners looking to lower their monthly payments through refinancing.

The average rate on a 30-year fixed mortgage fell to 4.44%, from 4.47% the week earlier.

The U.S. housing market continues to struggle and has been under tremendous pressure for some time. Demand fell further after the

springtime expiration of federal tax credits for homebuyers

. Most analysts agree the situation is likely to get worse before it gets better.

Still, the housing market is making modest progress toward recovery. Data due to be released this week is expected to show sales of existing homes rose to a seasonally adjusted annual rate of 4.1 million in August, from 3.83 million, according to consensus estimates listed on

. New-home sales are also expected to have risen in August, to a seasonally adjusted annual rate of 291,000, from 276,000 in the prior month.

Sales of newly-built homes

fell 12.4% in July

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to a new record-low rate, while sales of existing homes

plummeted 27.2%

. Both sets of data came in far worse than expected.

The Commerce Department said Tuesday that

homebuilders began work on 10.5% more homes in August, and applications for building permits rose


>>Housing Starts Rise 10.5% in August

Housing starts came in at a seasonally adjusted annual rate of 598,000 in August, the highest level since April and better than the rate of 550,000 economics expected. The figure compares with a downwardly revised pace of 541,000 reported for July. The August gain was the largest increase since November 2009.

Construction of new single-family homes rose 4.3% to a rate of 438,000 in August, compared with a decline of 6.7% in July. Construction of multifamily homes, including apartment buildings and townhouses, rose 32.2% to 160,000.

Applications for building permits ticked up 1.8% to 569,000, stronger than the 560,000 expected, compared with a month-earlier report of 559,000 building permits. July's rate was the lowest since May 2009.

Building permits are viewed as an indication of future home construction.

Stocks in the homebuilding sector were mostly lower Wednesday. The

SPDR S&P Homebuilders

(XHB) - Get SPDR S&P Homebuilders ETF Report

, an exchange-traded fund that tracks the sector, closed down 1.5%. The

iShares Dow Jones US Home Construction

(ITB) - Get iShares U.S. Home Construction ETF Report

lost 0.9%.

Shares of

D.R. Horton

(DHI) - Get D.R. Horton, Inc. Report

lost 0.8%,


(PHM) - Get PulteGroup, Inc. Report


Toll Brothers

(TOL) - Get Toll Brothers, Inc. Report

0.6% and


(LEN) - Get Lennar Corporation Class A Report


Lennar said Monday it returned to year-over-year profitability

, beating quarterly expectations on higher revenue and a greater number of home deliveries.

>>Lennar Beats on Return to Profitability

Shares of


(NVR) - Get NVR, Inc. Report

bucked the trend Wednesday, gaining 2.1%

The housing market saw sales ramp up in March and April as consumers rushed to take advantage of tax credits that offered as much as $8,000 for first-time homebuyers and $6,500 for repeat buyers. Following the expiration of those credits on April 30, the market saw a dramatic decline in demand for the month of May that spilled over into June. Data for July showed a further drop in demand. Lawmakers later extended the deadline to close on a home purchase and still qualify for the tax credit to Sept. 30.

-- Written by Miriam Marcus Reimer in New York.

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Miriam Reimer


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