Construction of new homes fell in 2007, while mortgage applications have gone up.
New Home construction fell nearly 25 percent in 2007, the lowest in 27 years, a new government report shows.
But mortgage applications have hit their highest level in nearly four years, thanks to lower interest rates. The borrowing costs on a 30-year fixed mortgage averaged 5.69 percent this week, the lowest since July 2005.
One year ago, interest rates averaged 6.23 percent.
Many economists don't believe mortgage rates will decline much more. But even with a pledge last week by Federal Reserve Chairman Ben Bernanke that the central bank will cut interest rates further if needed to keep the country out of a recession.
Analysts said Bernanke's comments did not greatly alter the expectations of bond investors who have already built further rate declines into the prices they are willing to pay for Treasury's 10-year bond. Many said they believe the 30-year mortgage will move in a narrow range around 6 percent for the rest of this year unless the economy does go into a full-blown recession. If that occurs, they said rates will fall further.
Still Reuters reports that the drop in rates and flat to lower home prices is leading more people to buy a home. Economists say the higher number of new mortgages offers a glimmer of hope for the housing market.
Sources: CBN News, The Associated Press