More evidence of tax credit addiction
Want more proof of the housing market’s addiction/love affair with the tax credit?
Just check out what’s happened with mortgage applications.
Demand for new mortgages has gone on a roller coaster ride over the past few months.
The number of new mortgage applications fell steadily over the six weeks leading into November, hitting an historic low at mid-month.
But over the past few weeks, mortgage applications have exploded again, with a big jump last week.
Oddly, rates appear to playing at best a co-star role in this.
Despite some minor fluctuations, rates have stayed down and are now flirting once again with last spring’s historic low of 4.61 percent.
But if you match the rise and fall of mortgage demand with the debate in Congress over whether to extend the home buyer tax credit, then the yo-yo like fluctuations begin to make sense.
In the weeks this fall leading up to the extension by Congress of the home buyer tax credit, demand for new mortgages steadily dropped.
We are not talking about a one or two week cooling off. Rather, it was a six week decline that bottomed out in mid-November, when demand for new mortgages hit a 12-year low. No matter that rates had also fallen to a six month low as well by that point.
The decline mirrored the uncertainty in Washington over whether to extend the tax credit and how to do it – a debate only resolved in early November with the decision to both extend and expand the tax credit.
But as the news of the extension has filtered out into the broader marketplace, mortgage applications have shot up once again.
Mortgage applications jumped 8.5 percent last week, which followed a 2.1 percent increase the last week of November, the Mortgage Bankers Association reports.
While refinance activity appears to be leading the way, there has also been a respectable jump in purchase activity as well.
Hate it or love it, the tax credit is increasingly calling the tune in this market.
