The number of mortgage applications declined last week as fewer people refinanced, a private group's survey found.
The Mortgage Bankers Association's mortgage applications index fell 1.7 percent to 677.4 from 689.3 the week before. A measure of refinancing decreased 7.9 percent to 1,803.9, the lowest level since the first week of August.
The group's gauge of purchases rose 2.7 percent as 30-year fixed mortgage rates held below 6 percent. Borrowing costs have been slow to rise after the Federal Reserve raised its benchmark lending rate five times this year.
"This is a healthy housing market," said John Herrmann, director of economic commentary at Cantor Fitzgerald LP in New York. "The small rise in mortgage rates has been more than offset by the improving labor market, and that's going to continue to be the case in 2005."
The gauge of applications to purchase homes rose to 483.8 from 471.1. In 2004, the index averaged 455.
Mortgage rates remained below 6 percent for much of last year. Herrmann said that 30-year rates will probably rise to about 6.25 percent, a level that will keep home sales close to last year's record.
Sales of new and previously owned homes reached a record 7.76 million last year, according to the National Association of Realtors. The group forecasts sales to slow this year to 7.51 million, the second-highest ever.