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U.S. MBA's Mortgage Applications Index Rose 0.8% Last Week
Victor Epstein in Washington


Feb. 22 (Bloomberg) -- Mortgage applications in the U.S. increased for the first time in four weeks as home purchases rebounded from a two-year low.

The Mortgage Bankers Association's weekly index of applications to buy homes and refinance mortgages rose 0.8 percent to 578.5 during the week from 574.1, the industry group said today in Washington. The home purchase gauge increased 4.3 percent to 408.7 from 391.7, the lowest since December 2003.

Purchase applications have declined since reaching a high in June, and economists forecast housing will contribute less to economic growth this year. Mortgage rates remain at a level that may keep the market from collapsing at the same time price appreciation has started to slow.

``The housing market is slowing a little earlier than we expected this year, but it's not as steep a decline as we feared because mortgage rates remain historically low,'' Nathaniel Karp, an economist at Grupo Financiero BBVA Bancomer SA in Mexico City.

The mortgage bankers group's index of refinancing applications fell 4 percent to 1571.4 last week from 1636.7. Refinancing activity, a source of cash for consumers, is down 31 percent from a year ago.

The share of total applications resulting from refinancing fell to a 10-month low of 38.2 percent, from 41.2 percent. The portion claimed by adjustable-rate mortgages declined to 29.1 percent from 29.6 percent.

The average rate on a 30-year fixed mortgage decreased to 6.22 percent this week from 6.25 percent, according to the Mortgage Bankers Association. The rate compares with 5.74 percent a year ago. At the current 30-year fixed rate, borrowing costs for every $100,000 of a mortgage would be $613.77, compared with $582.94 a year earlier.

Mortgage Rates

The 30-year fixed mortgage rate has risen less than the federal funds target rate since the Fed began its series of increases in June 2004. The benchmark overnight bank rate has increased to 4.5 percent from 1 percent during the ensuring 20 months, compared with an increase of 25 basis points in the 30- year mortgage rate.

The average one-year adjustable mortgage rate increased to 5.60 percent from 5.52 percent last week, the mortgage bankers group said. That compares with 4.27 percent a year ago.

The average 15-year mortgage rate fell to 5.87 percent this week, from 5.92 percent, today's report showed. That compares with 5.27 percent a year ago.

``I'm seeing some gradual softening of about 5 percent in real estate prices so far this year, but nothing precipitous that would indicate a bubble exists,'' Bob Moulton, president of Manhasset, New York-based Americana Mortgage Group, said in an interview.

Prices

The median price of a previously owned home rose 10.5 percent in December from a year earlier, the smallest year-over- year increase since a 10.3 percent rise in March 2005.

The Mortgage Bankers Association survey covers about half of all U.S. retail residential mortgage originations and has been compiled every week since 1990.

St. Joe Co., a property developer in Florida, reported Feb. 8 that traffic and sales slowed in the second half of last year as demand for homes decreased.

``The housing market is going from something that has been probably a little bit overheated to something that we think is returning to a norm,'' Peter Rummell, chief executive officer of the Jacksonville, Florida-based company said in a statement.

http://www.bloomberg.com/apps/news?pid=10000103&sid=a.074h_biefc&refer=us