Number of mortgage applications increases

The Federal Savings Bank
December, 2012

CHICAGO (The Federal Savings Bank) - According to data from the Mortgage Bankers Association's Weekly Mortgage Applications Survey for the week ending November 30, mortgage applications increased from one week earlier.

The statistics include an adjustment for the Thanksgiving holiday, showing that the housing market is continuing to make considerable strides toward a recovery. The Market Composite Index, which is a measure of mortgage loan application volume, jumped 4.5 percent on a seasonally adjusted basis from a week earlier while the index increased 49 percent compared to the previous week on an unadjusted basis.

The refinance share of mortgage activity also increased, to 83 percent of total applications from 81 percent the previous week, while the HARP share of refinance applications was boosted from 26 percent the previous week to 27.

Mortgage interest deduction
More homeowners are also now beginning to take advantage of the mortgage interest deduction, which is one of the most popular provisions of the tax code. Even though the number of Americans taking advantage of the deduction is increasing, the Internal Revenue Service reported that only a quarter of tax filers claim it.

"This is going to have an impact on the real estate market, especially as we're just coming out of a recession," said Mark Feinroth, a lobbyist for the Maryland Association of Realtors. "It's a particularly bad time to bloody the nose of the home industry again."

Americans who use the deductions vary across the country, ranging from a high of 37 percent of taxpayers in Maryland to as low as 15 percent in North Dakota and West Virginia, according to a USA Today analysis of IRS data.

The government is now dealing with what some are calling a possible 'fiscal cliff,' which will occur at the end of the year once tax cuts that were imposed under former President George W. Bush expire. Mortgage interest deductions are part of the deal that government leaders are attempting to settle on, and is a major issue as a result of the deduction costing the treasury $108 billion a year.

Although there is uncertainty with the current state of the housing market, prices are still at historically low rates, which should encourage first-time home buyers to consider purchasing the home of their choice.