Big bounce in MBA mortgage applications

Yowser ... I may be bearish on the outlook for the housing/mortgage industries. But that was one heck of a big bounce in mortgage applications in the most recent week. Apps for purchase loans jumped 16.2% in the week ended Jan. 5. That's the biggest one-week rise since May 2003.

Now, here's where it gets tricky -- the Mortgage Bankers Association's figures are notoriously volatile around the Christmas/New Year's holidays. Just three weeks ago, the purchase apps index plunged 10.6% after dropping 5.9% the week before. So you have to take the figures with a grain of salt. But it is clear that housing demand has bounced off the summer lows.

The question now is whether that bounce is sustainable and/or whether we've seen the worst of it in housing. I don't believe so, given the gigantic inventory overhang we have and the fact homes still remain largely unaffordable from a historical standpoint. I believe a weak spring selling season is in store, and that pricing, sales, and inventories come more into balance sometime in 2008.