Home Builder's Sentiment Jumps Two Points:

Builder confidence in the market for newly constructed single-family homes  in August rose two points to 60 from a reading of 58 in July on the National Association of Home Builders/Wells Fargo Housing Market Index (HMI). Any reading above 50 is positive, a reading below 50 is negative.

“New construction and new home sales are on the rise in most areas of the country, and this is helping to boost builder sentiment,” said NAHB Chairman Ed Brady, a home builder and developer from Bloomington, Ill.

“Builder confidence remains solid in the aftermath of weak GDP reports that were offset by positive job growth in July,” said NAHB Chief Economist Robert Dietz.  “Historically low mortgage rates, increased household formations and a firming labor market will help keep housing on an upward path during the rest of the year.”

Two of the three HMI components posted gains in August. The component gauging current sales conditions rose two points to 65, while the index charting sales expectations in the next six months increased one point to 67.  The component measuring buyer traffic fell one point to 44.

Looking at the three-month moving averages for regional HMI scores, the South registered a two-point uptick to 63, the Northeast rose two points to 41 while the West was unchanged at 69. The Midwest dropped two points to 55.

Mortgage applications jump 7% as rates drop on weak GDP

Lower interest rates driven by a weak GDP reading for the second quarter boosted mortgage applications last week, a sharp reversal from the previous week.

Total mortgage application volume increased 7.1 percent on a seasonally adjusted basis last week from the previous week, when applications fell 3.5 percent, according to the Mortgage Bankers Association.

The drop in interest rates for the second week in a row also spurred a 10 percent increase in mortgage refinance activity from the previous week.

With lingering concerns over a weak second quarter reading of US GDP growth, along with continuing anxiety over global growth and financial markets, rates edged lower for the second week in a row, " said Joel Kan, associate vice president of industry surveys and forecasts at the Mortgage Bankers Association. He said Friday's strong employment report for July was too late to influence average mortgage rates.

He said home purchase applications increased 2.6 percent last week, reversing three-straight weekly declines. The level was almost 13 percent higher than a year ago.

GDP for the second quarter came in at 1.2 percent, versus an expected 2.6 percent.

The increase in refinance activity was led by government refinance applications, which saw a 27 percent increase. 

The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($417,000 or less) decreased to 3.65 percent from 3.67 percent, with points increasing to 0.34 from 0.30 (including the origination fee) for 80 percent loan-to-value ratio loans. That rate is down 48 basis points in the past year.

Matthew Graham, chief operating officer of Mortgage News Daily, said that the strong uptick in refinancing applications made sense given recent events, which spurred demand.

"It might seem like refi apps increased more than is justified by the drop in rates, but it actually makes fairly good sense if we break down the timing," Graham wrote in an email. "The following week [after the July FOMC decision] began with rates near two week lows, more aggressive government loan pricing noted at several lenders... all serving to motivate application demand."

UPDATED: This story was updated to include comments from Matthew Graham, chief operating officer of Mortgage Daily News.

Source: Ivan Levingston

Special to CNBC.com

Pending Home Sales 2nd Best in Last 12 Months:

Pending home sales, based on signed contracts but not yet closed, rose 0.2 percent in June compared to May and is 1 percent higher than June 2015, according to the National Association of Realtors (NAR).

The improvement puts sales at the second-highest level of the last 12 months.

"Until inventory conditions markedly improve, far too many prospective buyers are likely to run into situations of either being priced out of the market or outbid on the very few properties available for sale," said Lawrence Yun, the NAR's chief economist, in a release.

Housing inventory was almost 6 percent lower at the end of June compared to a year ago, and home prices, while easing up slightly, are still rising at a faster pace than wage and income growth.

Realtors say the one positive development in the first half of this year was a decline in investor sales activity, from a high of 18 percent in February to a low of 11 percent in June. That is the smallest share since July 2009 and likely due to the drop in the number of distressed homes for sale.

"Limited selection of homes at bargain prices is reducing the number of individual investors willing or able to buy," wrote Yun. "This will hopefully open the door for first-time buyers, who made some progress last month but are still buying homes at a subpar level even as rents increase at rates not seen since before the downturn."