US mortgage requests up, 30-yr rate at 7-month low
Wed February 18, 2004 10:49 AM ET
By Richard Leong
NEW YORK, Feb 18 (Reuters) - Americans filed more mortgage applications last week as interest rates on 30-year fixed-rate mortgages fell to their lowest levels in seven months, an industry trade group said on Wednesday.
The Mortgage Bankers Association said its seasonally adjusted market index, a measure of weekly mortgage activity, rose for the week ending Feb. 13 by 4.9 percent to 837.1 from the previous week's 797.8, as average 30-year mortgage rates fell 14 basis points to 5.46 percent, the lowest rate since the July 11 week last year.
Mortgage demand experienced a spike to a five-month high at the start of the year when mortgage rates fell sharply. But the appetite for home loans had suffered a three-week decline from the mid-January peak as rates have inched higher.
The group's purchase index, a gauge of new loan requests for home purchases, rose 2.9 percent to 413.9 from 402.2 last week.
The Washington trade group's refinancing index also increased 6.4 percent to 3,298.3 from previous week's 3,099.1.
The mortgage industry group's weekly mortgage barometer is a gauge for home sales that are hovering near record highs but had cooled off a bit at the end of 2003.
In addition to weaker sales, U.S. home builders' optimism faltered in response to slower traffic from potential buyers due to inclement winter weather in the first half of February.
"The cold had a big impact," said Stephen Stanley, chief economist at RBS Greenwich Capital.
The National Association of Home Builders said on Tuesday its housing index, a measure of builder sentiment about sales and buyer traffic, was at 65 in February, down from January's upwardly revised reading of 69.
Although the home builder index fell for a second consecutive month, home builders expect that favorable industry conditions, like low mortgage rates in the foreseeable future, will fuel healthy home sales, the home builder group said.
But this generally high level of builder optimism raises concerns among some analysts as it may result in supply outstripping home demand, which is expected to stay flat or to fall in 2004.
"There's a growing divergence between new home sales, and homes being started and those still on the market," said Scott Winningham, an economist at Stone & McCarthy Research Associates in Princeton, New Jersey on Tuesday before the mortgage report was released.
Both housing starts and permits fell in January, according to the latest report from the U.S. Commerce Department but some analysts feel that rising mortgage applications and spring weather ahead portend a rebound in housing activity.
"I'm not worried about today's numbers," RBS' Stanley said. "When the weather turns (warmer), the housing number should firm again."
Domestic home builders broke ground for new homes at an annualized rate of 1.903 million units in January, 7.9 percent lower than December's downwardly revised pace of 2.067 million units, the Commerce Department said on Wednesday.
The January rate in U.S. housing starts was lower than the average forecast of two million annualized units by analysts polled by Reuters.
Housing permits, which indicate future home starts, fell 2.8 percent in January from December.
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