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The U.S. housing market continued to gain momentum and average mortgage rates increased again during the August 24 week.

The average 30-year fixed-rate mortgage increased to 3.66 percent from 3.62 percent in the previous week, according to Freddie Mac's weekly Primary Mortgage Market Survey. The 15-year average FRM increased 1 basis point for the week to 2.89 percent.

Mortgage applications continued to decrease with the increase in rates. The Mortgage Bankers Association reported a decrease of 7.4 percent in mortgage loan applications from the previous week.

The MBA's weekly survey report also stated a 9 percent decrease in the number of refinance applications during the week. Refinancings as a percentage of total loan applications decreased for the week as well, falling from 81 percent to 80 percent.

The Mortgage Bankers Association's average 30-year fixed-rate mortgage contract rate increased 10 basis points to 3.86 percent for loan balances below $417,500. The average contract rate reported by the Mortgage Bankers Association for 30-year FRMs above the $417,500 level increased to 4.11 percent from 4.03 percent.

The National Association of Realtors, Commerce Department and Federal Housing Finance Agency also released housing market reports this week that showed further signs of strengthening in the real estate market.

Wednesday's National Association of Realtors' Existing-Home Sales report stated an increase in existing-home sales of 2.3 percent for the month of July. The report also showed an increase in the median selling price for all existing-homes and a decrease in the percentage of distressed homes. According to the NAR, homes are also turning over more quickly represented by a 6.4 months supply reported in July versus a 9.3 months supply in July 2011.

Thursday, the Commerce Department released its July New Residential Sales report which detailed housing sales and price levels for newly built homes. According to the report, new home sales increased 3.6 percent in July and were 25.3 percent higher than July 2011.

The FHFA House Price Index, which tracks repeat-home sale prices for all mortgage loans backed by Fannie Mae and Freddie Mac, was also released on Thursday. The FHFA's HPI report stated an overall increase in existing-home prices of 0.7 percent for the month of June and a 3.0 percent increase from 2Q 2011 to 2Q 2012.

Additionally, on Friday, Freddie Mac released its monthly portfolio volume summary which stated an ending portfolio balance of $1.998 trillion in July. The GSE reported an annualized decrease in the portfolio of 8.7 percent.

Given the Treasury Department's new terms, Fannie Mae and Freddie Mac will be required to decrease their portfolios by an annual rate of 15 percent, 5 percent greater than previously agreed upon under the conservatorship. The Treasury's goal in winding down the portfolios is to provide greater return to taxpayers on the GSEs' investments. The new terms will also require quarterly earnings to be paid to the Federal Housing Finance Agency in place of dividend payments previously paid to the conservator.

Source: Mortgage Market Weekly Update: August 20-24