You may not think it by looking at its stock price today, but this has been a good week for Bank of America (NYSE: BAC ) . While shares of the nation's second largest bank by assets are down nearly 1% as I write, they're nevertheless considerably higher relative to Monday's close.
This has been a particularly important week for banks thanks to a handful of economic reports that illustrate the ongoing recovery in the housing market. On Tuesday, two leading indexes confirmed the upward ascent in home prices. The broader index published by the Federal Housing Finance Agency had prices rising by 0.7% in April, compared to March, and by 7.4% compared to the same month last year. Meanwhile, the narrower Case-Shiller index estimated a 2.5% sequential rise and a 12.1% annual increase.
Also on Tuesday, the Commerce Department provided its estimate of new home sales for the month of May. Sales of new single-family houses came in at a seasonally adjusted annual rate of 476,000. As I noted here, this was 4.1% better than the previous month, and an impressive 29% above the same month last year.
On Wednesday, the Mortgage Bankers Association noted that the mix between refinance and purchase-money mortgages continues to readjust. Overall mortgage applications decreased last week by 3%, led by a 5% fall in refinance applications. However, applications for purchase-money mortgages were up by 2%. The impetus for the respective moves is related directly to the trend in mortgage rates.
Fast forward to Thursday, when two additional reports cast even more light on the housing market. Freddie Mac released the results from its Primary Mortgage Market Survey, which provides a weekly average of mortgage rates. According to the survey, the rate on a conventional, conforming 30-year fixed-rate mortgage shot up to 4.46% this week from 3.93% last week. This was the highest weekly increase in the index's recorded history.
And finally, the National Association of Realtors provided an update on pending home sales -- that is, where a contract for purchase has been signed but the closing has yet to occur. According to its estimate, the metric reached a six-year high last month. On a month-over-month basis, it improved by 6.7%. On a year-over-year basis, it was up by 12.1%.
While all of these reports paint slightly different pictures of the housing recovery, the general sense in all of them is the same: Things are continuing to head in the right direction. For Bank of America, this is huge, as it will decrease the costs associated with servicing mortgages, and it will also likely lead to fewer mortgages falling into default and/or foreclosure. It's for these reasons, in turn, that shares of the banking behemoth rallied this week, despite being down today.
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