New-home sales surge 9.6%, mortgage applications up

— -- Two reports Wednesday indicated there is new life in the housing market.

The Commerce Department said new home sales surged 9.6% in July from June and the Mortgage Bankers Association said mortgage loan applications increased a seasonally adjusted 7.5% the week ended Aug. 21 from a week earlier, as loan rates edged up.

Home sales rose for a fourth straight month and beat expectations.

Sales rose to a seasonally adjusted annual rate of 433,000 from an upwardly revised June rate of 395,000.

It was the strongest sales pace since September and exceeded the forecasts of economists surveyed by Thomson Reuters, who expected a pace of 390,000 units. The last time sales rose so dramatically was in February 2005.

The median sale price of $210,100, however, was still down 11.5% from $237,300 a year earlier.

There were 271,000 new homes for sale at the end of July, down more than 3% from May. At the current sales pace, that represents 7.5 months of supply — lowest since April 2007. The decline means builders have scaled back construction to the point where supply and demand are coming into balance.

Buyers, meanwhile, are rushing to take advantage of a federal tax credit that covers 10% of the home price, or up to $8,000 for first-time buyers. Home sales must be completed by the end of November to qualify.

Builders and real estate agents are pressing Congress for that credit to be extended. If it isn't, sales could reverse their upward trend.

In the mortgage applications report, the MBA said on an unadjusted basis, applications are up 34.1% from the same week a year ago.

Refinancing applications increased 12.7% from the previous week, third increase in four weeks. The seasonally adjusted purchase index increased 1.0% from a week earlier, boosted entirely by increased demand for government loans, the MBA said. This marks the fourth consecutive weekly gain – first time this has happened since March, when fixed mortgage rates first dropped and stayed below 5%.