WASHINGTON ( TheStreet) -- Mortgage applications increased 2.2% last week as mortgage rates edged lower. The volume of mortgage loan applications increased 2.2% on a seasonally adjusted basis in the week ending Jan. 7, the Mortgage Bankers Association said early Wednesday.
Mortgage activity rose 2.3% in the prior week .
Refinancing application volume increased 4.9% from the previous week, following a 3.9% uptick in the prior week. Home-purchase loan applications fell 3.7% in the week, on a seasonally adjusted basis, after falling 0.8% a week earlier. On an unadjusted basis, the MBA's purchase index was 10.5% lower than in the year-earlier week.
He cited the usual suspects of high unemployment, potential buyers' low confidence in the stability of home prices and the large inventory of distressed properties that still need to be cleared. Brungardt estimated that the shadow inventory of homes could take two to three years to clear to a point where housing supply and demand begin to match up again, and that no acknowledged housing bottom will appear until that shadow inventory is significantly curtailed.
Homebuilders should expect material dampening of new-home purchases until then, Brungardt forecast. Current homeowners will also continue to be impacted unfavorably. Brungardt added that the recent spike in mortgage rates -- a jump of 70 basis points over a short period of time -- also worked to delay a housing market recovery. Rates are still historically low, he conceded, but need to stay in the 4.5% to 4.75% range in order to fuel a meaningful recovery. He expects mortgage rates will fall again and then level out for a period of time. The homebuilder sector is well off its late-spring peak, when buyers were rushing to take advantage of federal tax credits for homebuyers , and is only slightly higher than at the beginning of 2010. Whereas other sectors have begun a rebound in earnest, the housing sector continues to lag. The SPDR S&P Homebuilders ( XHB), an exchange-traded fund that tracks the homebuilder sector, remains more than 60% off its peak of $46.08 in early 2006. The iShares Dow Jones US Home Construction ( ITB) ETF remains more than 70% off its peak of $50.10 in the spring of 2006. Some potential homebuyers have decided to go ahead and sign contracts, hoping to lock in still-relatively-low rates. Homebuilder Toll Brothers ( TOL), which surprised investors with a return to year-over-year profitability in its fiscal fourth quarter, recently said deposits jumped 10% in the second half of November compared with year-earlier results.
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