Mortgage Applications Rise in December, Close 2012 Strong

Mortgage application activity turned in December to close the year on a positive note, according to ""Mortgage Bankers Association"":http://www.mbaa.org/default.htm (MBA) data compiled by ""Capital Economics"":http://www.capitaleconomics.com/.

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After declining 10.7 percent from October to November, mortgage applications picked up about 3.0 percent in December. The rebound boosted the annual growth rate from 26 percent in November to 30 percent by year's end.

The increase was fueled mostly by a turnaround in refinance applications, which came back from a 13.2 percent month-over-month decline in November to rise 3.9 percent in December.

Applications for home purchases also rose for the fourth consecutive month in December, increasing 3.6 percent from the previous month. Kelvin Davidson, a property economist for Capital Economics, says the sustained increase in purchase applications may mark a shift among buyers.

""To be fair, the bigger picture is that home purchase applications remain low in a long-run context,"" Davidson writes in the firm's most recent _US Housing Data Response_. ""But with the level having risen to a two-year high in December, there are now at least tentative signs that housing market activity may be broadening out from investors and cash buyers to mortgage-dependent buyers.""

Capital Economics also recorded another drop in 30-year fixed mortgage rates, which fell five basis points to 3.50 percent for December--a new record low. Given the apparent impact of the Federal Reserve's purchase of mortgage-backed securities under its quantitative easing initiative, Davidson says ""it would be no surprise to see further gains in new mortgage applications over the coming months.""