The Mortgage Bankers Association (MBA) has reported a rise in mortgage applications in the US for the second straight week. Real estate analysts believe this could be a sign that the housing market demand is beginning to recover from the lows that it has hit since the subprime crisis.
The Washington based MBA, which is the national association of the real estate finance industry tracks the demand for mortgages and refinancing. According to the association, its purchase index, which is a reliable indicator of the number of buyers seeking a mortgage for a new house purchase, rose by more than 5%. At the same time, its refinancing index fell by 1.5%. The association believes that this is a clear sign that the demand for houses is improving.
Conflicting Views from Analysts
Some analysts are of the view that even a small recovery in mortgage applications is further evidence that the economy is firmly on its way up. While the skeptics say that a rise in interest in mortgages does not always mean that house purchases will also go up.
There is also some concern that the interest in mortgages could be short lived as it may be due to the $8,000 tax benefit that is currently on offer for first time home purchases. This benefit is valid only till April 30, and it would be interesting to see if mortgage applications continue to rise beyond that date.
Small Rise in Mortgage Rates
The association also said that the rate for 30-year fixed rate mortgages also inched higher to 5.01% from the previous week’s level of 4.95%. The rate had hit a record low last year when both Federal funds rate and housing demand were at rock bottom.
However, this small increase does not necessarily mean that home buyers have already lost the opportunity of a good deal on a mortgage. The rise in the rate translates to an increase of only $4 on a monthly installment for a $100,000 loan, when compared with a deal that you would have got in March last year.
Real estate companies would be hoping that the increase in mortgage applications is here to stay. Most of these companies have been struggling to survive for the last two years and many have already gone bankrupt. But it has been reported that some of them are seeing a revival in demand and are getting back to profitability.