Homebuyer Tax Credit Fuels Surge in Mortgage Applications

Tax creditsA key index that measures mortgage applications showed a significant increase of 6.8 percent last week in borrowers seeking to purchase a home, reaching the highest level since Oct. 30.
The surge seems to be part of a last-minute push to take advantage of first-time and repeat homebuyer tax credits that are set to expire April 30, according to the Mortgage Bankers Association.
Housing market analysts have widely perceived the extension and expansion last November of the tax credit program as a failure in its second round.
But apparently there is a realization now that the tax credits won’t be extended again.
“Purchase applications have increased over the past month, and are now at their highest level since last October when many homebuyers were rushing to get loans closed before the expected expiration of the homebuyer tax credit,” said Michael Fratantoni, MBA’s vice president of research and economics.  “We may be seeing a similar pattern now, as the extended version of the tax credit ends next month.”
The MBA’s overall index covers refinances and purchases. Its refinance index for last week decreased 1.3 percent from the previous week. Its purchase index increased 6.8 percent from one week earlier. Both figures are on a seasonally adjusted basis.
The four week moving average is up 5.4 percent for the seasonally adjusted purchase index, while this average is up 0.9 percent for the refinance index.
First-time homebuyers can qualify for a credit of up to $8,000, while repeat buyers who qualify can get a credit of up to $6,500.
Yesterday, another closely watched index showed that home prices rose just modestly in January, raising concerns that the housing market rebound remains weak.
Home prices in 20 cities tracked by the Standard & Poor’s/Case-Shiller price nudged up 0.3 percent on a seasonally adjusted basis in January, compared with December.
But the Case-Shiller index measures prices over a three month period. In its figures yesterday, the period covered November through January. November saw a big jump from the original deadline of the first-time homebuyer tax credit, which would have expired by Dec. 1.

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