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Mortgage rates increased slightly for the week, despite the Federal Reserve's announcement to continue with its MBS purchase program.

Freddie Mac's (OTCQB:FMCC) Primary Mortgage Market Survey showed an increase in the average 30-year fixed-rate mortgage of 4 basis points, ending the week at 3.41%.

The 15-year average fixed-rate mortgage also increased, adding 6 basis points to end the week at 2.72%.

Demand for mortgages continued to decline, according to the Mortgage Bankers Association's Weekly Mortgage Applications Survey. The MBA's Market Composite Index, which measures weekly mortgage applications, fell 12% for the week. The Index has been trending downward for the past three weeks, falling 17.40% since the MBA's October 4 report.

Refinancings have also been declining. The weekly report showed a decrease in refinance applications of 13% and in the past three weeks the Refinance Index has fallen 20%.

The MBA's Purchase Index also showed a decline for the first time in five weeks, falling 8%.

In other real estate news, home prices and home sales increased. Freddie Mac also released its October 2012 U.S. Economic and Housing Market report, which showed an improved outlook for the second half of the year.

Zillow's third quarter Real Estate Market Reports showed an increase of 0.8% in home values in September and a 1.3% increase for the third quarter. Home values were also up 3.2% on an annual basis, according to the research report.

The Federal Housing Finance Agency also reported an increase of 0.7% in its House Price Index for August. The August improvement brings the Index level to 191.2, up 4.7% on an annual basis.

New homes sales in September were up 5.7% to a seasonally adjusted annual rate of 389,000. The sales rate for new home sales in September was 27.1% higher than the rate in September 2011, according to the Commerce Department.

New and existing-home sales totaled 5.139 million in September with existing-home sales declining 1.7% for the month to a seasonally adjusted annual rate of 4.75 million in September.

Pending contracts for existing-homes, reported by the National Association of Realtors, were up in September. The NAR Pending Home Sales Index added 0.3% in September.

Overall, given stronger sales and construction data reports in the first half of the year, total housing sales estimates reported in Freddie Mac's October 2012 U.S. Economic and Housing Market Outlook were revised up for the second half of the year. Third quarter estimates for housing sales increased to a seasonally adjusted annual rate of 5.02 million from 4.92 million and fourth quarter estimates increased to 5.10 million from 5.0 million.

The GSE's October report also indicated that residential fixed investments added 0.3% to GDP in the first half of 2012. As the housing market's growth returns to pre-crisis levels, Freddie Mac expects the real estate sector to continue adding to U.S. expansion in the second half of the year. The GSE also expects housing expansion to offset some of the drag on the economy expected to occur from the fiscal cliff's effects in 2013.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

Source: Mortgage Market Weekly Update: October 22 - 26, 2012