LIVE MARKETS-Two for the seesaw: Mortgage rates gain heat, demand falls

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TWO FOR THE SEESAW: MORTGAGE RATES GAIN HEAT, DEMAND FALLS

The mortgage teeter-totter tilted the other way last week.

After falling for eight weeks, the average 30-year fixed contract rate USMG=ECI rose 5 basis points to 6.67%, according to the Mortgage Bankers Association (MBA).

Mortgage demand, on the other end of the seesaw, promptly came down by a total of 6.2%

While the level of applications for loans to purchase homes USMGPI=ECI was essentially unchanged, refi demand USMGR=ECI, which accounted for 42% of total mortgage applications, plunged 12.8%.

"Growing inventories of homes on the market and steadier mortgage rates are supporting homebuying activity thus far this spring," writes Mike Frantantoni, MBA's chief economist.

The 30-year fixed rate is now 25 basis points cooler than the same week last year. Over the same time period, purchase and refi demand are up 6.0% and 69.6%, respectively.

Applications for loans to purchase homes is considered among the more leading housing market indicators, and stacked against Tuesday's building permits data - another leading housing indicator - one would conclude that the housing market, while not exactly booming, isn't falling apart, either.

But all economic indicators are viewed through the rear view mirror.

To get an idea of where investors think the housing market will be six months to a year down the road, look to the stock market.

For much of the past few years, the S&P 1500 Homebuilding index .SPCOMHOME and the Philadelphia SE Housing index .HGX have handily outperformed the broader stock market.

That picture has changed.

The chart below, rebased to 12 months ago, shows that relationship began to seesaw the other way sometime in November.

As it stands now, the SPCOMHOME and HGX have dropped over the past year by 13.9% and 7.6%, respectively. The broader S&P 500 .SPX has gained 8.4% over the same time frame.

(Stephen Culp)

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