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(Mortgage rates and loan applications report updated with additional information.)



) -- Mortgage applications rose last week even as

mortgage rates

edged higher.

The volume of mortgage loan applications increased 2.1% on a seasonally adjusted basis in the week ending Nov. 19, the Mortgage Bankers Association said early Wednesday.

Refinancing applications decreased 1% from the previous week to the lowest level observed since late June. New-home purchase loan applications jumped 14.4% from the prior week, which included Veterans Day though no adjustments were made for the holiday.

"The increase in purchase applications last week aligns with other incoming data suggesting that consumers are feeling somewhat more confident with their financial situation," said Michael Fratantoni, MBA's vice president of research and economics. "While the increase was magnified somewhat by the comparison to the holiday week, the level of purchase applications on a seasonally adjusted basis is now at its highest level since the

expiration of the homebuyer tax credit."

>>Homebuilder Stocks: Behind the Numbers

A total of 78.6% of all loan applications last week were for refinancing existing mortgages, down from 80.3% share observed in the prior week.

Mortgage activity ticked up last week despite higher mortgage rates. The average rate on a 30-year fixed mortgage increased to 4.5% from 4.46% in the prior week. It is the highest rate observed since the week ending Sept. 3, but remains near all-time lows.

Record-low and near-record-low mortgage rates failed to spark robust demand for housing in recent months, but continue to have an effect on homeowners looking to lower their monthly payments through refinancing.

While any mortgage demand can be viewed in a positive light, the still-struggling housing market continues to be plagued by sluggish demand, in part because of the tight credit market and inability of many potential buyers to access the credit they need to finance a mortgage.

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Many Americans suffer from negative equity, where the amount they owe on their home is higher than the value of it, making them unqualified for refinancing.

Sales of newly built homes unexpectedly fell 8.1% in October to a seasonally adjusted annual rate of 283,000 the Commerce Department said Wednesday morning, up from

a rate of 307,000 in September.

>>New-Home Sales Fall 8.1% in October

The government report estimated that, at the current sales pace, there was an 8.6-month supply of new homes on the market at the end of October, up from a 7.9-month supply at the end of September. There were a total of 202,000 new homes available for purchase during October, the lowest level since June of 1968.

The median sales price of a new home fell a record 13.9% in the month to $194,900, the lowest level since 2003. October's median new-home sale price was 9.4% lower than in the year-earlier month.

New-home sales declined in most areas of the U.S., led by a 23.9% drop in the West, 20.4% in the Midwest and 12.1% in the Northeast. In the South sales gained 3.1%.

On Tuesday, the National Association of Realtors reported that

sales of previously occupied homes fell a slightly better-than-expected 2.2% in October to a seasonally adjusted annual rate of 4.43 million units.

>>Existing-Home Sales Fall 2.2% in October

Though the data came in just a hair better than economists had forecast, October's rate of existing-home sales remained 25.9% below year-earlier levels "when sales were surging prior to the

initial deadline for the first-time buyer tax credit," the NAR said. July's rate of 3.84 million homes sold was a

15-year low.

"The housing market is experiencing an uneven recovery, and a temporary foreclosure stoppage in some states is likely to have held back a number of completed sales," said NAR chief economist Lawrence Yun. "Still, sales activity is clearly off the bottom and is attempting to settle into normal sustainable levels. Based on current and improving job market conditions, and from attractive affordability conditions, sales should steadily improve to healthier levels of above 5 million by spring of next year."

James Russell, partner and CFO at The Collingwood Group, a Washington-based business advisory firm specializing in the mortgage industry, told


it's a good sign for the housing market and economy that a bulk of October's existing-home purchases were made by investors, not by people who intend to live in the homes.

He said the trend is "encouraging" and "good for America," showing that "there is real interest in real estate" and that investors see long-term value in buying homes at relatively depressed prices today. Still, he conceded that American families continue to be constrained by credit availability and a poor job market.

Homebuilders began construction on 11.7% fewer homes in October to an annualized rate of 519,000, far worse than the expected contraction rate. Applications for building permits, meanwhile, inched 0.5% higher to 550,000, from 547,000.

>>Housing Starts Fall 11.7% in October

Pending home sales fell 1.8% in September, worse than expected and 24.9% lower than in the year-earlier month.

A variety of factors have kept potential buyers from making home purchases in recent months. High unemployment, a lack of credit and the

expiration of federal tax credits for homebuyers are obvious reasons. The recent foreclosure scandal also plays its part.

Just as the subprime mortgage troubles expanded into a total housing market downfall, the latest scandal in the home loan industry has expanded into a nationwide political firing line aimed -- once again -- toward the banks due to

problems with foreclosure filings

, dubbed "robo-signing."

"People are talking about settlements but we haven't seen anything yet," said Doug Roberts, chief investment strategist at Channel Capital Research and author of

Follow the Fed to Investment Success

. "We're all waiting with baited breath for a solution."

"People are talking about settlements but we haven't seen anything yet," said Doug Roberts, chief investment strategist at Channel Capital Research and author of

Follow the Fed to Investment Success

. "We're all waiting with baited breath for a solution."

Stocks in the homebuilder sector were mostly higher Wednesday afternoon.

>>Homebuilder Stocks: Behind the Numbers


SPDR S&P Homebuilders

(XHB) - Get SPDR Homebuilders ETF Report

, an exchange-traded fund that tracks the homebuilder sector, was 2.2% higher following the new-home sales report, while the

iShares Dow Jones US Home Construction

(ITB) - Get iShares U.S. Home Construction ETF Report

gained 2.1%.

Among individual builders,


(PHM) - Get PulteGroup Inc. Report

traded 2.1% higher,

D.R. Horton

(DHI) - Get D.R. Horton Inc. Report

0.4% and

Toll Brothers

(TOL) - Get Toll Brothers Inc. Report

1.8% and

Standard Pacific



Brazilian homebuilder



bid up 3%.

-- Written by Miriam Marcus Reimer in New York.

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Miriam Reimer


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