Mortgage bankers' application index rose 0.6% in past week

Purchase index up 1% as fixed rates stabilize

August 01, 2004|By BLOOMBERG NEWS

An index of mortgage applications in the United States rose last week as more Americans applied for loans to buy homes, an industry group said.

The Mortgage Bankers Association's gauge of applications to purchase and refinance homes increased 0.6 percent to 621.4 compared with a week earlier. The purchase index rose 1 percent to 444.8. The measure of homebuying reached a record 501.6 in January.

Job growth, consumer optimism at a two-year high and 30-year fixed mortgage rates holding below 6 percent are underpinning the housing market, economists said. Sales of new and previously owned homes reached a record 8.3 million at an annual pace in June.

"As fixed mortgage rates have stabilized, so have mortgage applications," said Steven Wood, president and principal economist at Insight Economics LLC in Danville, Calif. "Rising incomes are, so far, offsetting most of the negative effects on homebuying of higher mortgage rates."

The average rate on the 30-year fixed mortgage rose to 6.08 percent from 5.98 percent the week before.

"What we see is an economy now that is creating upward of 400,000 jobs per quarter," said Jay Brinkman, an economist at the bankers' association. "These are paychecks that are going to people who want to spend it on housing."

Applications to refinance mortgages made up 36.8 percent of the association's mortgage measure, down from 37.1 percent a week earlier. Refinancing, which had been a source of extra cash for homeowners last year, has fallen 60 percent during the past year as higher mortgage rates make it less lucrative for homeowners.

The group's measure of applications to refinance loans fell 0.1 percent last week to 1,648.8.

"New-purchase business continues to be a very strong segment of the market," said Robert Cole, chief executive of New Century Financial Corp.

New-home sales in June were the second-fastest on record, the Commerce Department said last week. Sales of existing homes, which make up 85 percent of home sales, rose to a record annual pace, according to the National Association of Realtors.

"Underlying demand for housing is going to remain reasonably solid, although presumably less than the peaks that we've seen in recent months," Federal Reserve Chairman Alan Greenspan said in testimony before Congress last month.

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