An index of U.S. mortgage
applications fell for a third week, reflecting fewer home
purchases and less refinancing, an industry group report showed.
The Mortgage Bankers Association’s index dropped 6.8 percent
to 797.8 from 855.7 the week before. The home purchase
applications measure fell 9.4 percent to 402.2 from 444.
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Home sales may slow this year to 6.9 million, second only to
last year’s record 7.19 million, as mortgage rates rise,
according to the latest forecast from the National Association of
Home Builders. Stronger economic growth may help generate more
jobs and incomes, underpinning housing demand as borrowing costs
increase.
“While housing activity is likely to slow in 2004, the
growth in income that we expect should mitigate the adverse
effects of higher interest rates,” said Gerald Cohen, a senior
economist at Merrill Lynch & Co., in a note to clients.
The average 30-year fixed mortgage fell to 5.60 percent from
5.63 percent, according to the mortgage bankers group. At the
current rate, the monthly payment on a $100,000 mortgage,
including principal and interest, would be $574.08, compared with
$536.21 when the rate was at a record-low 4.99 percent in June.
Mortgage rates generally move in line with long-term
securities such as 10-year Treasuries. The yield on the 10-year
note, which averaged about 3.99 percent last year, is forecast to
rise to 4.40 percent by the second quarter, based on the median
estimate of economists surveyed by Bloomberg News from January 30 to
February 6.
Freddie Mac, the largest U.S. mortgage financier after
Fannie Mae, is more upbeat about housing. It said home sales this
year may surpass the record set in 2003, boosted by rising
employment and historically low interest rates.
Bloomberg News
