Highlights
Federal Reserve officials have been offering an upbeat view of the housing sector and last week's NAHB housing market index did pop higher, but a run of mortgage application data and last week's housing starts report paint another picture. The Mortgage Bankers' purchase index fell 4.8 percent in the Feb. 16 week to 381.4, pushing the four-week average below 400 to 398.7. The index has now slipped back to levels not seen since the beginning of the fourth quarter.

Interest rates aren't to blame! Thirty-year fixed mortgages averaged a favorable 6.19 percent, down 5 basis points in the week. But lower interest rates haven't been driving up refinancing demand as refinancings made up 44.9 percent of total applications, down from 46.1 percent in the prior week. The refinancing index fell 5.4 percent to 1,921.1.

Whether the housing market has hit bottom remains a nagging question for the economic outlook as well as for home-products companies such as Home Depot which posted weak results yesterday. There won't be any more hard data on the sector this week but do watch for results from Home Depot rival Lowe's on Friday. Existing home sales and new home sales are certain to be calendar highlights next week.