U.S. 

U.S.

June 14 (Bloomberg) -- Mortgage applications in the U.S. rose for the first time in four weeks. suggesting the decline this year in the housing market will be gradual.
The Mortgage Bankers Association's index of applications to buy a home or refinance an existing loan increased 7 percent. the most since the end of April. to 571.9 last week from 534.4. The gauge is still down 34 percent from the same time last year.
Higher borrowing costs are likely to cause sales to fall after five record years. according to forecasts by the National Association of Realtors. Purchases this year may still be the third-highest ever as job gains and income growth keep the market from a more pronounced slowdown. economists said.
``There is still an underlying demand for homes. which should keep the mortgage index from going into freefall.' said Chris Rupkey. senior financial economist at Bank of Tokyo- Mitsubishi UFJ Ltd. in New York. ``The mortgage index has fallen for a few weeks. so it is not surprising to see a bounce in activity this week.'
The mortgage bankers group's refinancing index rose 10.6 percent. the most in a year. home sales are falling off. chief economist at Briefing in Boston. ``It bodes fairly poorly for the housing sector and the economy.'
The real estate market has contributed as much as half the U.S. economy's growth since 2001. according to estimates by Merrill Lynch & Co. economists. Housing will weigh on the economy this year as smaller price gains and higher interest rates curb refinancing. homebuilding and housing-related purchases and services. economists said.
With less cash from refinancing. consumer spending growth may slow to an average annual rate of 3.2 percent for all of 2006. a recent Bloomberg News survey showed.
To help cushion the blow to housing from higher borrowing costs. homebuilders are calling on Federal Reserve policy makers to end a series of 16 straight increases in interest rates that began in June 2004.
``This is the time for the Fed to pause on rate hikes because we have some interest-sensitive housing markets that have become vulnerable.' David Lereah. chief economist at the National Association of Realtors. said in a statement on June 6.
The National Association of Realtors estimates a 6.8 percent drop in sales of previously owned homes in 2006 from last year's record 7.08 million. The Washington-based group also forecasts new home sales to decline 13 percent from the 2005 high of 1.28 million.
The average rate on a 30-year fixed mortgage last week rose to 6.61 percent. close to a four-year high. from 6.6 percent. The rate has increased about 1 percentage point in the last year.
At last week's average 30-year fixed rate. monthly principal and interest costs for each $100. when the average rate was 5.62 percent.




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