Applications for mortgages at highest since May

October 03, 2004|By BLOOMBERG NEWS

A measure of the number of applications to buy a home or refinance mortgages rose last week to the highest level since early May, as housing keeps fueling the economy.

The Mortgage Bankers Association's gauge of loan demand increased 4.9 percent to 724.7, the highest since the week that ended May 7. The index has risen in three of the past four weeks.

Mortgage rates declined last week to the lowest levels since March, spurring purchases and prompting more refinancing, the group's figures showed. A record 7.65 million homes will be sold this year, said a forecast by Freddie Mac, the second-largest buyer of U.S. mortgages.

Applications to refinance loans increased 7.7 percent to 2,211.1 last week, the highest level since the end of April, from 2,052.5. Refinancing helps stimulate the economy by giving some consumers more cash to spend. Those applications made up 45.9 percent of total requests last week, up from 44.5 percent the week before.

New-home sales, which make up 15 percent of the market, jumped 9.4 percent in August, the biggest gain since the end of 2000, the Commerce Department said last week. Existing-home sales fell 2.7 percent in August to a 6.54 million annual rate, the National Association of Realtors said Sept. 24. That was still the fifth-highest on record.

Sales of previously owned homes are counted when the sales contract closes, while new-home purchases are tabulated when the purchase agreement is signed. That might account for some of the difference in the movement last month. The recent drop in interest rates might boost sales of existing homes in coming months, National Association of Realtors Chief Economist David Lereah said.

Because stronger economic growth may push up interest rates, sales could be hard-pressed to accelerate next year. The National Association of Realtors sees existing single-family home sales falling 6.2 percent next year. Last month, Federal Reserve policy-makers raised the benchmark interest rate a quarter point to 1.75 percent.

The mortgage bankers survey covers about 50 percent of all retail residential mortgage originations.

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