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One More Sign of a Housing Recovery

Chris Preston

With home prices hitting a seven-year high in March, it’s clear that the U.S. housing recovery is not a myth. For further proof, just look at a mortgage-rate chart.

Thirty-year mortgage rates have risen fast in recent weeks. Since entering May at a near-historic low of 3.35%, mortgage rates have surged to their highest level in more than a year.

The average 30-year mortgage rate is up to 3.89% – a 16% increase in less than a month. April 2012 was the last time mortgage rates were this high.

It’s another indication of the improving health of this housing market. When people are buying, mortgage rates are high. On a historical basis, 3.89% is still low. It still pales in comparison to the 6.5% rate we saw in late 2008 before the subprime mortgage crisis fully took hold. And it’s still well off the 5% rate we saw in early 2011.

But this is the fastest increase in more than two years. Combine that with an 11% rise in home prices, and it’s obvious that the housing recovery is gaining momentum.

One housing-related stock that’s been riding the recovery more than anyone is MGIC Investment Corop. (NYSE: MTG), America’s largest private mortgage insurer. I wrote about MTG in early January, after the stock had doubled in two months. That was mere prelude to what was to come.

Since then, MTG shares are up 117%, advancing to their highest level in almost two years.

With no profits, it’s highly unlikely MTG can keep this rally going. In fact, it’s down 4.5% today.

But with mortgage rates on the rise again and the real-estate market finally stabilizing, be on the lookout for the next MTG-like play in the housing sector.

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