Applications to purchase home mortgages increased for the week marking the first rise in home sales since the federal government’s tax credit expired, indicating that a housing recovery is possible nationally as sales improve, according to the Mortgage Bankers Association. Refinancing also shot up.
The Market Composite Index, a measure of mortgage loan application volume, rose 17.7% for the week ending June 11th, but the seasonally adjusted Purchase Index increased 7.3% for the week. The rise represents an increase in home sales nationally for the first time in six weeks.
Refinancing is also picking up with an increase of 21.1% for the week, the association said. It’s the highest the Refinance Index has recorded since May 2009.
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“While it is clear that purchase applications in May dropped sharply as a result of the tax credit induced increase in applications in April, it is unclear whether we are seeing the beginnings of a rebound now,” said Michael Fratantoni, MBA’s Vice President of Research and Economics. The four week moving average for the seasonally adjusted Market Index is higher by 3.8%.
Mortgage rates remain near their record low, averaging 4.75% up a slight .03 from a week ago on a |
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conventional 30-year fixed rate loan, according to Freddie Mac. A year ago the same mortgage averaged 5.38%. Starts on new home construction fell 17% to an annualized rate of 468,000 homes in May from April, triggered by the first time home buyers tax credit.
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“Nonetheless, household balance sheets have been improving over the past four quarters,” said Freddie Mac chief economist Frank Nothaft. “In aggregate, households gained $6.3 trillion in net worth in the first quarter from a year ago, according to the Federal Reserve. In addition, homeowners have regained $1.1 trillion in home equity over the same time period.”
Refinancing activity increased to 74.8% of total applications from 72.2% the previous week, the highest refinance share since December 2009. The adjustable-rate mortgage (ARM) share of activity increased a slight 5.2% from 5.1% of total applications over the previous week.
The average contract interest rate for 30 year fixed rate mortgages increased to 4.82% up from 4.81%, with points decreasing to 0.89 from 1.02 for 80 percent loan-to-value (LTV) ratio loans. However, due to the decrease in points, the effective rate decreased from last week.
