A newly sold home at a new housing subdivisionis seen 
in San Marcos, California August 20, 2007. 
Reuters/Mike Blake
U.S. mortgage applications climbed last week from a seven-month low, the Mortgage Bankers Association said on Wednesday, adding to emerging signs that the three-year housing market collapse may be abating.

Demand for home loans rose after four straight weekly declines, as U.S. mortgage rates dipped and more borrowers applied to buy houses as well as refinance.

The trade group's seasonally adjusted mortgage applications index, which includes both purchase and refinance loans, rose 6.6 percent to 548.2 in the week ended June 19. This modest rise is from the lowest level since late November.

In terms of home sales and building activity, we've probably reached a bottom, Keith Hembre, chief economist at First American Funds in Minneapolis, Minnesota said on Tuesday. But it's highly unlikely there will be a sharp recovery from here.

Existing home sales rose in May for the first back-to-back gain since September 2005, the National Association of Realtors said on Tuesday.

The average 30-year loan rate dipped 0.06 point to 5.44 percent last week, nearly a full percentage point less than a year earlier.

A rate spike from a record low 4.61 percent in March to 5.57 percent in early June, however, has crushed a burgeoning refinance boom.

With rates starting to ease again, some borrowers may be rushing to lock in now rather than chance a renewed surge in borrowing costs.

The Mortgage Bankers Association said its refinancing index rose 5.9 percent from a seven-month low to 2,116.3 last week. Demand for refinancing was at least triple this level in March when mortgage rates hit their record lows, the group said.

On Monday, the MBA slashed its forecast by more than 25 percent for total mortgage loan origination in 2009, mostly due to fewer refinancings and a slow start to the federal Home Affordable Refinance Program.

A plodding upturn in home purchases has been dominated by first-time buyers taking advantage of a federal tax credit and distressed prices on foreclosures.

The mortgage purchase index increased 7.3 percent to 280.3, the highest since early April, the MBA said.

I've seen for the last several months a flattening of the market, which candidly is close to euphoria if you're a new home builder given how bad it has been, Richard Dugas, chief executive of No. 2 U.S. home builder Pulte Homes , said this week at the Reuters Global Real Estate Summit in New York.

Mortgage rates are still incredibly good despite rising from historic lows, he noted.

The greater deterrents are the longest recession since the Great Depression and the highest unemployment rate in more than 26 years, most economists agree.