The US economy, since the fall in the first week of July 2009, has yet again seen a fall in he number of mortgage applications in September 2009, according to a report released by the Mortgage Bankers Association. However this is no reason to panic. Although the fall in mortgage applications marked the end of a 2 week climb in the numbers there is still a lot of positive market information out there and consumers should be able to take heart from it.

The number of US mortgages declined by 3.1 percent in comparison to the week ended 28th August. In addition to this the refinance index also took a dip or around 3.1 percent. However, the figures for mortgage  applications are still about 23 percent higher than they were a year ago. In addition to this the Mortgage Bankers Association saw a decline of about 8.6 percent in applications to either buy or refinance an existing home. In addition to this the rising numbers in foreclosures and the falling prices of homes make a complete housing sector recovery a little hard. Industry analyst further estimate that the US home prices may fall by another 10.5 percent and eventually hit bottom by the second quarter of 2010.

US Mortgage Applications – Good News

In spite of all this information, there is still good news out there in the market place which should be driving the sales of homes and hence mortgage applications up again. Some good news for consumers is as follows:

• Low Interest Rates : This has probably been the given driver of home sales in recent times. The 30-year home loan interest rate fell from 5.07 percent to a low of 5.04 percent. In addition to this the 15-year interest rate saw a decline from it’s 4.5% figure to 4.47%. In accordance with the statement made by a spokesperson of Freddie Mac these rates have been the lowest since the week ended 28th of May. Further to this the Federal Reserve has been assuring the industry that these rates will allowed to be low for a while. This in turn will greatly aid the first home buyers entering the market. The government at this stage does not look like they want to withdraw the stimulus package too early.

• First Home Owners Tax Credit: The government has given first home buyer entering the market a tax concession of 10% of the purchase price, which is capped at $8,000. Unlike previous tax concessions, this one is not repayable over a 15 year time frame. This is entirely a one off payment to first home buyers which is not to be paid back. This is expected to further boost the sales for homes and the number of mortgage applications as more and more first home buyers try and enter market prior to the end of the year and before the tax credit is withdrawn.

• End Of Recession Announcement: Earlier this month, the Federal Reserve Chairman, Ben Bernanke announced that the US recession might finally be over. The end of recession can only mean economic growth from here on in. In due course this will lead to rise in employment rates etc, there by bolstering the home purchases and the number of US mortgages again.

Even though we have seen a fall in the US mortgage applications, the industry on the whole remains optimistic. We should see a surge in the number of mortgage and refinance applications as consumers try and take advantage of the low interest rates and the first home owners tax concession.

References:

1. Mortgage Rates in U.S. Decline – Bloomberg
2. Mortgage Applications, Loan Rates Fall – Fox Business