Application Numbers Slightly Up in January, Future Looks Hazy

January loan application volumes rebounded slightly after December's steep drop, but overall numbers remain low, ""Capital Economics"":https://www.capitaleconomics.com/ said in its most recent US Housing Data Response.

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Using weekly stats published by the ""Mortgage Bankers Association"":http://mba.org/default.htm (MBA), Capital Economics calculated a 2.5 percent increase in applications last month, turning the trend around from an 18.2 percent decline in December and a 1.3 percent drop in November.

Looking at refinancing numbers, Capital Economics observed a 1.1 percent improvement to follow December's 23.7 percent decline. Still, with monthly losses vastly outpacing gains in the last year, refinance applications remain 64.5 percent down from a year ago.

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""The remortgaging boom of 2012-13 is well and truly over, and we do not see a significant rally in remortgaging activity on the horizon,"" said Paul Diggle, property economist for the firm.

With the refinance boom in the rearview, Capital Economics shifted its focus to purchase applications, which rose 3.1 percent in January--consistent with a slight decline over the month in 30-year fixed mortgage rates.

Still, purchase application volumes remain lower than they were at this point last year, and with the Federal Reserve's latest Senior Loan Officer Survey indicating a drought in purchase demand, further declines may be on the horizon.

On the other hand, expected improvements in labor, increasing confidence in the housing recovery, and looser credit conditions may act as counterweights against recent downward trends, Capital Economic says.

""On balance, we think that the positives will outweigh the negatives, allowing applications for home purchase to increase modestly. But this outcome is far from certain, and we wouldn't be too surprised to see mortgage applications flat line this year,"" Diggle said.

""One thing is for certain--if mortgage demand does not recover, with investors retreating from the market, overall housing demand will start to wane.""