Purchase applications for home mortgages fell a seasonally adjusted 2 percent to the lowest level since May in the July 21 week, but applications for refinancing rose 3 percent as homeowners took advantage of a drop in interest rates. Despite the week's decline, purchase applications were 8 percent higher than in the same week a year ago. The refinancing share of mortgage activity increased by 1.3 percentage points to 46.0 percent. Mortgage rates fell in the week, with the average interest rate on 30-year fixed rate conforming mortgages ($424,000 or less) dropping 5 basis points to 4.17 percent. Though the 8 percent year-on-year growth in purchase applications is impressive, the fact that prospective home buyers are less active than they were in June does not bode well for a housing market that gave signs of faltering last month, judging from recently released housing data, showing existing home sales declining 1.8 percent in the month and year-on-year sales up only 0.7 percent. Additional clues on the state of the housing market will be provided later this morning in the release of the new home sales report for June, where general strength is expected.