More people applied for mortgage loans to either purchase a home or to refinance their existing mortgage loan according to a survey of mortgage lenders released yesterday morning.
A weekly survey conducted by the Mortgage Bankers Association reported that in the week ending November 27, mortgage applications to purchase homes increased 4.1 percent from a week ago, while mortgage applications to refinance rose 1.7 percent from the prior week.
The weekly survey indicates that households are responding to falling mortgage rates as well as to the recently announced extension and expansion of the first-time homebuyer tax credit. The survey reported that 30-year mortgage rates finished the week at 4.79 percent compared to 4.83 percent a week earlier. The one-year adjustable rate mortgage finished the week at 6.56 percent compared to a 6.67 percent rate a week ago.
The survey reported that refinance applications comprised 72.1 percent of all mortgage applications, while purchase applications accounted for 27.9 percent. ARM applications accounted for only 4.8 percent of total applications.
The rise in purchase applications in the latest week is partly due to the extension of the first-time homebuyer tax credit. Several weeks ago, Congress and President Obama agreed to extend the tax credit, which was due to expire November 30, for another seven months. They also agreed to expand the tax credit by including homeowners and by raising household eligibility income requirements. As a result, more households now qualify for the tax credit, suggesting that more households will be applying for mortgage loans to purchase homes over the next seven months.
Applications to purchase homes have trended upward for the past 3 weeks. Historically, home purchase applications have been a reliable indicator of future home sales activity. This week’s news bolsters the belief that the housing sector is stabilizing and is on the road to recovery.
However, the housing market continues to face serious obstacles which could restrain the pace of future home sales. Continued job losses throughout the economy remain a hurdle to a housing recovery, inhibiting housing demand. Further, it is likely that foreclosures will continue to climb due to interest rate resets on option ARM and interest only loans.