Bloomberg News  

Mortgage applications in the U.S. rose 5.5 percent last week, reflecting gains in both purchases and refinancing.

The Mortgage Bankers Association’s index of applications to buy a home or refinance a loan rose to 657.4 from 622.9 the prior week. The group’s purchase index rose 5.2 percent and its refinancing gauge rose 6 percent.

The two-year housing recession is likely to deepen as stricter lending rules make it harder and more expensive to get loans or refinance. Some economists say the applications report overstates activity because the survey only includes retail lenders, which have probably seen an increase in business as many wholesale brokers closed their doors.

California’s economy is headed for a rough patch as the housing slump intensifies, but the Bay Area should fare much better than the rest of the state, according to a widely watched forecast.

A spreading housing downturn, marked by a construction slowdown, falling sales and prices, and rising foreclosures, will be the main drag on the economy, the UCLA Anderson Forecast predicts in its quarterly outlook set for release today. The construction and real estate finance sectors are already shedding jobs, and UCLA economists expect more of the same over the next year.

WASHINGTON — – Sales of existing homes in the U.S. will fall further and prices will drop more sharply in 2007 than had been expected, a leading real estate trade association predicted Tuesday.

The National Assn. of Realtors trimmed its sales forecast for the seventh straight month and widened its predicted drop in existing-home values.

Existing-home sales should hit a pace of 5.92 million units this year, down from the 6.04 million units the group had predicted last month.

The national median sales price for existing homes should ease by 1.7% to $218,200 this year. Last month the trade group said prices would slip 1.2%.