NEWSWORTHY ECONOMIC REPORT OF THE WEEK

The U.S. economy grew at a revised 5.6% annual rate in the first quarter, the fastest rate in nearly three years, the Commerce Department said in its final revision to gross domestic product estimates. A month ago, the government said the economy grew at a 5.3% pace after a tepid 1.7% pace in the fourth quarter of last year.

Sales of new homes increased 4.6% in May, surprising Wall Street, which had been expecting a 4% drop in sales, the Commerce Department said June 26. Sales of existing homes, however, dropped 1.2% in May, according to the National Association of Realtors.

Against a background of rising mortgage rates, applications for mortgage loans at U.S. banks dropped by 6.7% for the week ending June 23 to the lowest seasonally adjusted level since May 2002, the Mortgage Bankers Association said June 27. The number of mortgage applications was down 31% compared with a year ago. Applications for mortgages to purchase homes fell a seasonally adjusted 6.2%, hitting the lowest level since November 2003. Purchase applications were down 19% in the past year. Applications for refinancing loans fell 7.5% on a seasonally adjusted basis. Refinance applications were down about 47% in the past year.

On June 29, the Federal Reserve raised the Federal Funds rate (the overnight interest rate that banks charge one another) by another quarter point to 5.25%. The Dow Jones Industrial Average rallied more than 200 points on the news, with investors believing the Fed could step back from further increases if future inflation readings subside.

(Courtesy of Louise Rose, ELB Mortgage Brokers)