U.S. mortgage applications rose after three week series of declines as interest rates went lower according to the Mortgage Bankers Association last Wednesday.

The seasonally adjusted index of mortgage applications for the week ended August 22 increased 0.5 percent to 421.6. Mortgage applications during the previous week had fallen to their slowest rate since December 2000.

Borrowing costs on 30-year, fixed-rate mortgages, excluding fees, averaged 6.44 percent, down 0.03 percentage point from the previous week.

Interest rates were not far from year-ago levels of 6.41 percent.

The MBA’s seasonally adjusted purchase index rose 0.6 percent to 315.9. The index came in well below its year-ago level of 424.0, a drop of 25.5 percent.

Overall mortgage applications last week were 31.5 percent below their year-ago level. The four-week moving average of mortgage applications, which smooths the volatile weekly figures, was up 0.05 percent to 424.9.

The group’s seasonally adjusted index of refinancing applications increased 0.3 percent to 1,038.0. The index was down 40 percent from its year-ago level of 1,729.6.

The refinance share of applications increased to 35.2 percent from 34.8 percent the previous week. The adjustable-rate mortgage share of activity decreased to 7.9 percent, down from 8.0 percent the previous week.

Fixed 15-year mortgage rates averaged 5.94 percent, down from 5.99 percent the previous week. Rates on one-year ARMs increased to 7.15 percent from 7.07 percent.

While U.S. housing market indexes remains unstable, data from the MBA may help the market see how the troubled housing sector is performing.

Freddie Mac (NYSE:FRE) today released the results of its Primary Mortgage Market Survey (PMMS) in which the 30-year fixed-rate mortgage (FRM) averaged 6.40 percent with an average 0.6 point for the week ending August 21, 2008, down from last week when it averaged 6.47 percent. Last year at this time, the 30-year FRM averaged 6.67 percent.

The 15-year FRM this week averaged 5.93 percent with an average 0.6 point, down from last week when it averaged 6.00 percent. A year ago at this time, the 15-year FRM averaged 6.12 percent.

Five-year Treasury-indexed hybrid adjustable-rate mortgages (ARMs) averaged 6.03 percent this week, with an average 0.6 point, down from last week when it averaged 5.99 percent. A year ago, the 5-year ARM averaged 6.35 percent.

One-year Treasury-indexed ARMs averaged 5.33 percent this week with an average 0.7 point, up from last week when it averaged 5.29 percent. At this time last year, the 1-year ARM averaged 5.84 percent.

"Interest rates for fixed-rate mortgages continue to drift down as reports of economic weakness persist. July's leading economic indicators fell by more than the market consensus and manufacturing slowed in both the Philadelphia and Richmond regions. ARM rates, on the other hand, rose slightly after the Federal Reserve's Open Market Committee hinted it might increase the overnight bank lending rate in its August 5th minutes," said Frank Nothaft, Freddie Mac vice president and chief economist.

However, the housing front is providing some encouraging signs. The pace of home price declines slowed down for the fourth straight month in June and the number of metro areas exhibiting monthly gains rose from seven to nine, according to the S&P/Case-Shiller 20-city composite index. There are also signs more buyers may be getting ready to return to the market. The Conference Board says the share of households planning to buy a home within six months is now at its highest level since March. At the same time, the supply for unsold new homes is down to 10.1 months, the lowest since February, as single-family existing homes (excluding condos and co-ops) start to sell more quickly. Although, when condos and co-ops are included, the resale inventory did edge up."

reference: freddiemac 

The Commerce Department reported that sales of new homes posted an unexpected gain in July. This was due to heavily discounted properties which attracted house hunters to become home buyers.

The sales of new single-family homes climbed 2.4 percent last month to a seasonally adjusted annual rate of 515,000 units. This was the highest since April.

But sales in June turned out to be much weaker than the government earlier estimates. Sales dipped to a pace of just 503,000 units, the worst showing since September 1991. June’s sales were initially reported to have clocked in at a pace of 530,000 units.

Economists were forecasting sales to drop in July, although they expected the pace to have been around 525,000. Given June’s sharp, downward revision, the level of home sales in July turned out to be less than analysts were anticipating.

Even with the over-the-month increase, new-home sales are down a whopping 35.3 percent from last July, underscoring just how much the housing market has eroded.

Home prices also continued to sag.

The average price of a new-home sold in July was $294,600, down 4.1 percent from a year ago. The median home price — where half sell for more and half for less — was $230,700, down 6.3 percent from last year.

Consumers have watched their single-biggest asset depression, causing them to feel less wealthy and less inclined to spend.

A growing number of analysts believe the economy will hit another deep pothole later this year as the bracing effects of the government’s tax rebates fades.

Even with the government’s housing-rescue package signed into law by President Bush last month, foreclosures are expected to keep rising into next year.

Meanwhile, there’s questions about the future ability of mortgage finance giants Fannie Mae and Freddie Mac to supply money for home loans. The two companies have cut back the availability of mortgages as they cope with growing losses from foreclosures. The companies’ stocks have been hammered recently as investors become increasingly convinced that a government bailout will be needed.
 
 

The S&P’s Case-Shiller National Home Price Index dropped by a record 15.4 percent during the second quarter from the same period a year ago.

The index released Tuesday showed home prices falling by the sharpest rate ever in the second quarter considered to be a buying season.

The monthly indices also registered record declines. The 20-city index dropped by 15.9 percent in June compared with the same month last year. This largest drop since the index was started in 2000. The 10-city index fell 17 percent, its biggest decline in its 21-year history.

However, the rate of single-family home price declines slowed from May to June, suggesting that the gravity of the housing slump may be waning.

“While there is no national turnaround in residential real estate prices, it is possible that we are seeing some regions struggling to come back, which has resulted in some moderation in price declines at the national level” said David M. Blitzer, chairman of the index committee at S&P.

Also, fourteen cities in the monthly index showed improvements from May to June and nine recorded positive returns.

Still, on a year-over-year basis, no city in the Case-Shiller 20-city index saw price gains in June, the third straight month that’s happened.

Las Vegas topped the list of decliners, plunging 28.6 percent followed by Miami at 28.3 percent and Phoenix with 27.9 percent.

Charlotte, N.C., the last city in the index to report depreciation during the current housing downturn, posted its largest drop since 1991 at 1 percent.

The National Association of Realtors reported a 3.1 percent increase in sales of existing homes in July to an annual pace of 5 million units compared to June’s sales of 4.85 million units.

However, the inventory of homes for sale hit an all-time high, the latest indication that the housing slump is far from over. Despite the third monthly sales increase this year, the number of unsold single-family homes and condominiums rose to 4.67 million, the highest number since 1968, when the Realtors group started tracking the data.

That represented a 11.2-month supply at the July sales pace, matching the all-time high set in April.

Until the inventory level is reduced to more normal levels, analysts say, the housing slump is likely to persist. The inventory level is being driven higher by a massive wave of mortgage foreclosures.

Prices nationwide are not expected to hit bottom until early next year. Prices went down significantly while home sales were about 13 percent lower than a year ago. The median price for a home sold in July dropped to $212,000, down by 7.1 percent from a year ago.

Between 33 and 40 percent of sales activity is coming from foreclosures or other distressed properties, estimated Lawrence Yun, chief economist at the Realtors group.

"People are responding to lower prices," Yun said, but there is "too much uncertainty" about the housing market's future to mark a definite bottom.

One key unknown for the U.S. housing market is the future ability of mortgage finance companies Fannie Mae and Freddie Mac to supply money for loans. The two government-sponsored companies have dramatically cut back the availability of mortgages as they cope with mounting losses from foreclosures.