ACTIVITY IN HOME LOANS FLAT IN MARCH.

Byline: Gregory J. Wilcox Staff Writer

Home loan activity continued flatlining in late March, a trade association said Wednesday.

For the week ending March 24, the Mortgage Bankers Association's Market Composite Index, a measure of mortgage loan application volume, edged up 1 percent from the prior week.

But it was down 15 percent from the comparable period a year earlier, the Washington, D.C.-based association said. Neither number is adjusted for seasonal factors.

The seasonally adjusted purchase index increased by 2.7 percent, the association said, while refinance activity slipped 1 percent weekly.

Doug Duncan, the association's chief economist, said that March was a choppy month with interest rates bumping up and down. He attributed this week's uptick in purchase activity to buyers jumping into the market in advance of the Federal Reserve Board increasing short-term rates once again.

"It's still continuing to trend down," Duncan said of the home outlook.

That's been expected. Prices will eventually react to slowing sales, too. Duncan notes that in the past five years there were almost no markets in the nation that saw home prices decline.

"We're now returning to a normal market where you will see some markets where prices decline," he said. But it's too soon yet to say where that will happen.

Market fundamentals, like foreclosure rates, remain sound.

For example, an MBA analysis of foreclosure activity found that in the 2005 fourth quarter, just 0.2 percent of home loans in California were in foreclosure, unchanged from the start of that year and up slightly from the second and third quarters.

"It's ridiculously low. California can't go anywhere but up," Duncan said.

By comparison nationally about 1 percent of loans were in foreclosure.

Last month La Jolla-based DataQuick Information Systems said that foreclosure activity in the state as measured by lender-issued default notices increased an annual 15.6 percent. In Los Angeles County they were up 10.7 percent.

Neither number is alarming because activity bottomed out in the third quarter of 2004. And the vast majority of homeowners catch up on their payments, said DataQuick analyst John Karevoll.

"It's trending up but it's still real low. Before you can call foreclosures part of the market we'd have to have twice the level we have today," he said.

But buyers are adjusting to what's becoming a new reality of higher interest rates that are still low by historical standards.

In the latest MBA survey the refinance share of mortgage activity decreased to 37.3 percent of total applications from 38.1 percent the previous week.

The adjustable-rate mortgage (ARM) share of activity increased to 28.7 percent of total applications from 28.3 percent the previous week.

And in the latest survey the average interest rate for a 30-year fixed-rate mortgage increased to 6.36 percent from 6.31 percent a week earlier, with points decreasing to 1.02 from 1.13 (including the origination fee) for loans with a 20 percent down payment.

The average rate for 15-year fixed-rate mortgages increased to 6 percent from 5.99 percent, with points increasing to 1.12 from 1.09 (including the origination fee).

The rate for one-year ARMs increased to 5.83 percent from 5.68 percent, with points increasing to 0.88 from 0.86 (including the origination fee).

greg.wilcox(at)dailynews.com

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