After months and months of dreary news from the worlds of housing and real estate, here's a bit of a pick-me-up: applications for mortgages rose 32.2% during the week of January 4, which was shortened by the New Year's holiday. This was a welcome change, as demand had been heading lower for the three previous weeks. The Mortgage Bankers Association said in its weekly findings that its overall application index rose to 706 from 533.9 the previous week. Holiday-season volatility could be partially responsible for this jump -- in the week surrounding New Year's Day 2007, the application index was 16.6% higher.
Refinance volume spiked 53.9% during the week, while purchase activity was up 14.7%. Refinance applications accounted for 57.7% of total applications, up from 50.9% the previous week. (With all the speculation surrounding future rate cuts, wouldn't homeowners want to wait and see what happens at the next Federal Open Market Committee meeting in two-plus weeks?)
The index measuring application volume is still 13% lower than where it was four weeks ago and a whopping 62% below its May 30, 2003 peak of 1,856.7. But volume is 7.06 times higher than it was in mid-March, 1990, when the Association initially began tracking this data.
On the interest-rate front, rates are shifting lower. In the last week, the average interest rate for 30-year fixed rate mortgages hit 5.73% from 6.05% the previous week. The average rate for 15-year fixed-rates dropped to 5.21% from 5.61%.
The Fed-funds futures market is currently pricing in a 25-basis-point rate cut in the federal funds rate at the January 29-30 meeting, which would bring the rate to an even 4.0%. The February fed-funds contract is pricing in a 76% chance for a 50-basis-point cut to 3.75%.
Beth Gaston Moon is an analyst at Schaeffer's Investment Research.
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