Mortgage applications up, housing signals mixed
February 28th, 2007 - Category: Real EstateMortgage applications for U.S. home purchases and refinancing rose last week when long-term borrowing costs dipped, an industry trade group said on Wednesday, but other housing measures were mixed.
Stock and bond market turbulence on Tuesday yanked some Treasury yields to two-month lows, signaling a further slide infixed mortgage rates that should fuel home sales in coming weeks, analysts said.
It remains unclear how close the U.S. housing industry is to its trough, however, after varied signals on winter home sales that likely were distorted by a warm December and stormy January.
The Mortgage Bankers Association’s seasonally adjusted index of mortgage applications increased 3.2 percent to 626.1 in the week ended February 23, up from this year’s low of 606.6 in the prior week.
Borrowing costs on 30-year fixed-rate mortgages, excluding fees, declined 0.03 percentage point to average 6.16 percent, the lowest since it was 6.13 percent in the year’s first week, according to the association.
Other indicators this week showed the biggest gain in existing home sales in January in two years and the steepest monthly drop in new home sales in 13 years. Home prices were steady to lower.
A sustained upturn in the housing market is considered unlikely with a glut of homes on the market. The supply of unsold new and existing homes grew in January.
“The troubling news with the home sales report is that months’ supply started to rise again, and that suggests we may have not seen the last of the subtraction from housing construction on GDP,” said Matthew Moore, economic strategist at Banc of America Securities.
The Mortgage Bankers Association’s seasonally adjusted purchase index, seen as a timely gauge of home sales, rose 5.2 percent to 401.3 in the latest week, it said. The group’s seasonally adjusted refinancing index advanced 1.2 percent to 1,943.5.
Last week’s results were adjusted for the Presidents Day holiday.
On a four-week moving average, which smooths out volatility, the seasonally adjusted market index is down 0.2 percent to 625.6 and the purchase index is off 0.4 percent at 397.0, the MBA said. The refinance measure is flat at 1,959.9 compared with 1,959.1.
MIXED SIGNALS
“The purchase application index is down 6.7 percent in February compared to its January average. However, if even part of yesterday’s decline in rates holds, we think purchase applications will increase in the weeks ahead,” said Nancy Vanden Houten, analyst at Stone & McCarthy Research Associates in Princeton, New Jersey.
“Otherwise, we would look for the purchase application index to hover around recent levels.”
The state of the U.S. housing sector is critical for determining the health of the economy, most economists agree.
Some economists suggest the swift slump following a record five-year surge in home sales and prices is near its end while others say the correction has not yet been deep enough.
Sales of existing homes in January staged their biggest gain in two years, boosted by unusually warm weather, the National Association of Realtors said on Tuesday.
Builders for months have been slicing prices and offering incentives to lure buyers and pare inventory.
Still, inventories of unsold existing homes in January remained high at a 6.6 months’ supply based on the current sales pace while overall sales rose 3 percent. Existing homes represent 85 percent of the housing market.
New home sales, in contrast, fell 16.6 percent in January and homes available for sale rose to 6.8 months’ worth from 5.7 months’ supply, the Commerce Department said on Wednesday.
Construction should subtract from economic growth through the first half of 2007 before starting to ramp up, Moore said.
“In the second half of the year, we could see construction come back,” he said. “The question is whether consumer spending will continue to hold up in the face of this continued weak housing data.”
Source: Reuters
