LIVE MARKETS-Home improvement: Mortgage rates dip, applications pick up

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HOME IMPROVEMENT: MORTGAGE RATES DIP, APPLICATIONS PICK UP

Investors had to make do with a single lonely bit of economic data on Wednesday courtesy of the Mortgage Bankers Association (MBA).

The short version: the cost of financing home loans dropped, giving a boost to demand.

The average 30-year fixed contract rate USMG=ECI shed 7 basis points to settle at 6.35%, the lowest level in a month.

That prompted a 10.1% increase in demand for loans to purchase homes USMGPI=ECI - among the housing market's most forward-looking indicators. Refi applications USMGR=ECI, which accounted for a 44.2% share of the mortgage pie, grew by 6.8%.

Combined, home loan demand jumped 7.9% last week.

"Mortgage rates declined last week as financial markets responded positively to the Middle East ceasefire and the lower trend in oil prices,” said Mike Fratantoni, MBA’s chief economist. "Despite the geopolitical uncertainty, housing demand is being supported by a still resilient job market, and homebuyers are experiencing a buyer’s market in most of the country given the higher levels of inventory relative to last year."

The 30-year fixed rate currently sits 55 basis points below where it was during the same week a year ago.

Over that same period, purchase applications have grown by 14.5%, while refi demand has increased 4.3%.

While purchase applications are relatively forward-looking, it's still last week's data.

Housing stocks, on the other hand, reflect where investors expect the sector to be six months to a year in the future.

With that in mind, investors' view of the sector is improving.

While housing-related indexes - the S&P 1500 Homebuilding Index .SPCOMHOME and the PHLX Housing Sector Index .HGX - handily outperformed the broader market in the first two months of the year, that advantage evaporated in March when the U.S.-Israeli war on Iran pushed interest rates higher, taking mortgage rates with them.

But the indexes have recovered lately.

Year-to-date, the SPCOMHOME and the HGX are now up 5.9% and 3.3%, respectively. The S&P 500 .SPX is up 3.2% so far this year.

(Stephen Culp)

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