Mortgage applications increase 2.3%

November 13, 2005|By BLOOMBERG NEWS

U.S. mortgage applications rose in the week that ended Nov. 4 for the first time in three weeks, reflecting more home purchases, according to a private group's survey released Wednesday.

The Mortgage Bankers Association's index of applications rose 2.3 percent to 661.3 from the previous week's 646.7, which was the lowest since April. The purchase index increased 6.4 percent to 465.7, also the first rise in three weeks, from 437.6. A measure of refinance applications fell to the lowest level since April.

Rising interest rates will take the steam out of housing, according to the latest National Association of Realtors forecast that shows home sales will slow in 2006 and provide less of a boost to economic growth.

"That fountain of youth from home-equity growth is going to dry up for consumers and we certainly could see lower-trend consumer spending growth next year as a result of that," said Scott Anderson, senior economist at Wells Fargo & Co. in Minneapolis, before the report was issued. "A soft landing is most likely for the housing market."

The refinancing gauge decreased 3.4 percent, the third straight decline, to 1798.8 from 1862.8.

The housing market has been the main driver of the U.S. economy this decade, accounting for 50 percent of the overall growth and more than half of the private payroll jobs created since 2001, economists for Merrill Lynch & Co. Inc. said in a report Aug. 15.

U.S. homeowners will turn a record $204 billion in real-estate equity into cash this year by refinancing mortgages at higher balances to take advantage of gains in property values, Freddie Mac said earlier this month. That number is set to shrink to $114 billion next year as the housing market slows, the report said.

The median price of a previously owned home fell 3.6 percent in September to $212,000 from a peak of $220,000 the previous month, the National Association of Realtors said last month.

Toll Brothers Inc., the largest U.S. builder of luxury houses, cut its 2006 forecast for home sales Tuesday and said the housing market was losing momentum.

Mortgage rates are responding to the 12 consecutive increases in the overnight lending rate to 4 percent that the Federal Reserve has engineered since June 2004.

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