March 31 (Bloomberg) -- Mortgage applications in the U.S. rose last week as purchases increased to the highest level since October, indicating buyers may be re-emerging to take advantage of the extended federal tax credit.
The Mortgage Bankers Association’s index climbed 1.3 percent in the week ended March 26. The Washington-based group’s purchase gauge rose 6.8 percent, the fourth gain in five weeks, while its refinancing measure dropped 1.3 percent.
The report signals housing may get a lift through the end of April, the deadline for Americans to sign a contract on a home and qualify for the tax incentive. At the same time, a lasting rebound in the real estate market will require an increase in employment that has yet to materialize.
“We expect to see gains in the next few months, with the tax credit helping to increase sales,” Julia Coronado, a senior economist at BNP Paribas in New York, said before the report. “Even with all the policy support, we’re not getting the kind of strong housing recovery we’d expected. We’ll inch our way forward.”
The government extended a credit for first-time buyers in November and expanded it to include some current owners. The move so far has failed to give sales a boost, recent reports show. Sales of existing U.S. homes fell in February for a third straight month, while purchases of new homes dropped to the lowest on record.
Home prices in 20 U.S. cities rose 0.3 percent in January, indicating the slump in property values may be over. The S&P/Case-Shiller home-price index climbed from the prior month on a seasonally adjusted basis after a similar gain in December.
Mortgage Rates
Today’s report showed the average rate on a 30-year fixed loan rose to 5.04 percent from 5.01 percent a week earlier, the mortgage bankers group said. At the current 30-year rate, monthly payments for each $100,000 of a loan would be $539, up $26 from a year earlier, when the rate was 4.61 percent.
The average rate on a 15-year fixed mortgage rose to 4.34 percent from 4.33 percent a week earlier. The rate on a one-year adjustable mortgage jumped to 6.88 percent from 6.75 percent.
As lending costs climbed, the share of applicants seeking to refinance dropped to 63.2 percent from 65 percent.
Some builders are finding ways to protect earnings. Lennar Corp., the third-biggest U.S. homebuilder by revenue, reported its quarterly loss narrowed after it cut administrative costs and trimmed incentives to buyers. Miami-based Lennar also benefited from selling in communities with less competition from foreclosures, said Chief Executive Officer Stuart Miller.
