Despite near-record-low mortgage rates and the cheapest housing prices in eight years, home lending has slipped this year to the lowest level since 1997.
The laggard loan market can be explained in part by the slow economy, numerous foreclosures and the proliferation of "underwater" loans -- those that exceed the value of the properties they secure.
But other factors are compounding the problem, including so-called refi burnout -- how many times, after all, can one refinance a home? -- and a wave of people who simply have decided that owning a home isn't what it was cracked up to be.
Weary of a noisy tenant on the other side of a common wall, Bruce and Deborah Dennis sold their Arcadia, Calif., duplex in April, and banked a $600,000 profit. They then went looking for a quieter place to spend their 60s.
Bruce Dennis' boss, a property manager, urged them to buy another home, saying they never again would see prices and mortgage rates so low at the same time. The couple searched seriously for two months, even bidding on a home. In the end, they opted to rent a house, leery of tying up capital and taking on the headaches of ownership with the housing market so shaky.
"We thought, 'Is buying really what we want to do?' I have no confidence that home prices are going back up any time soon," Bruce Dennis said.
Opt-outs like the Dennises are one reason why the mortgage business, which led the way into the Great Recession, is taking so long to come out of it.
Another factor is the slowing of the refinance market. Mortgage costs are near historical lows. But most of the lucky homeowners who still have equity and solid finances already have refinanced once or more and have long since locked in annual rates of less than 5 percent.
In 2003, as the housing boom took hold and 30-year fixed mortgage rates fell below 6 percent, refinancings propelled home lending to four times the current volume. As the rate tumbled toward 5 percent and then smashed that barrier in 2009 for the first time since 1956, mortgage lending was twice what it is now.
"There is a burnout phenomenon," said Michael Fratantoni, Mortgage Bankers Association economist. In addition, many would-be refinancers have been stopped by the declines in home prices, now back at 2003 levels, which has left them owing far more than their homes are worth.
"Borrowers who couldn't qualify for 4.5 percent mortgages last year for the most part still can't qualify this year," Fratantoni said.
And getting the purchase market up and running again would require "significant job growth," he said, something that has failed to materialize in the sluggish recovery that now threatens to fall back into recession.
The result of all this: Despite the confluence of lower home prices and rates, new mortgages are down by a third from last year. Lenders will write about $1 trillion in home loans this year, the smallest total since 1997, according to the Mortgage Bankers Association, which projects home lending will fall even lower in 2012.
Some say the combination of falling home prices, tight credit in the aftermath of the financial crisis and the flood of foreclosure sales has undermined the traditional view of homeownership as the engine of financial success.
In the middle of the last decade, when the term "ownership society" was coined, the homeownership rate was nearly 70 percent, the report noted. If delinquent borrowers were excluded, it said, the current rate, now 66.4 percent, actually would be 59.7 percent.
For those willing to take out mortgages despite the grim news, prospects are improving slightly. Lenders have eased some terms for the first time since the mortgage meltdown took hold, and some on the front lines say banks are abandoning the scrutiny bordering on suspicion with which they regarded potential borrowers.