Mortgage applications fall again to year-long low
posted at 2:45 pm on December 22, 2010 by Ed Morrissey
Don’t look for any help to the economy from the housing markets. Demand for mortgages hit a year-long low last week, dropping 18.6%, pushing the four-week moving average to almost -10%. The silver lining was that the drop came more from refinancing applications than sales:
Mortgage applications tumbled to their lowest level in nearly a year as a six-week-long rise in interest rates took a significant toll on demand, an industry group said on Wednesday.
The Mortgage Bankers Association on Wednesday said its seasonally adjusted index of mortgage applications, which includes both purchase and refinance loans, for the week ended December 17 decreased 18.6 percent, reaching its lowest level since the week ended January 1.
The four-week moving average of mortgage applications, which smooths the volatile weekly figures, was down 9.8 percent.
Re-fi applications dropped 24.6%, hitting a low not seen since the end of April. But purchase applications also fell, and the MBA’s purchase index dropped 2.5%, indicating that the housing markets are stuck in a generational trough.
A small part of the problem is an increase in rates for mortgages. The pressure on interest rates comes from the rising cost of Treasury yields, which have risen in reaction to the Fed’s quantitative easing strategy. The Treasury has to offer higher returns due to the dilution of the money supply created by QE2, which makes it more expensive for lenders to get the money to loan to customers. Mortgage rates haven’t risen much, though; a 30-year fixed mortgage averages 4.85%, under the average rate this time last year of 4.92%, and up only 0.01% from the previous week.
The problem isn’t interest rates, or supply, which is in abundance. The problem is demand and a lack of reliable valuation of current inventory. Until employment increases substantially, we won’t see buyers entering the market in the kind of numbers needed to rescue the housing markets. Until we see large numbers of people looking to buy and having the means to do so, valuation will still be difficult to determine and housing sales remain depressed.
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Jenfidel on December 22, 2010 at 6:54 PM
Very best to you, Sistah!
Key West Reader on December 22, 2010 at 6:55 PM
This is the best LOL so far. Equity you put into it? Like buying a house for $1.3M and watching it fall in value by more than $500K. Yeah, that’s a great way to build equity. You have been so brainwashed by the r/e industry that owning is a must at any cost.
I don’t depend on anyone’s good will. I have a contract that stipulates the terms. It’s called a lease in case you’re not familiar with ther word. If the landlord doesn’t live up to the terms, I don’t pay rent. You know, kind of like any other contract.
angryed on December 22, 2010 at 6:58 PM
How so?
angryed on December 22, 2010 at 7:00 PM
And then you’re evicted with no place to live, dumb *ss.You know exactly what I mean by equity, you idiot.
Jenfidel on December 22, 2010 at 7:39 PM
IF a GOP President is elected, and IF the economy is even salvageable, and IF he or she has a clue about how to run a nation.
Dark-Star on December 23, 2010 at 12:03 AM
This is true. Feds won’t be happy until all originators are reduced to a status similar to bank tellers and paid as such.
singer on December 23, 2010 at 8:51 AM
These are two of the most underutilized mortgage programs available, ones that can actually can HELP people. Most of the loan originators still out there working aren’t even aware of them, so it’s understandable that the general public isn’t either. However, the professional LO’s will know how to get this done if the property and borrower qualify.
If the mortgage is FannieMAe owned, then it may be eligible under the DU Refi Plus program which goes to 105% LTV.
If the mortgage is Freddie Mac owned, then it may be eligible under the Relief Refinance (Open Access for Correspondents) program which is stated to go to 125% LTV, though I’ve yet to find any investors that will go higher than 105%.
Under either program, if the existing mortgage dd not have PMI (private mortgage insurance) then the new mortgage does not need it even if the loan to value is higher than 80%.
If the existing mortgage did have PMI, then a new certificate would have to be issued to close the new loan. This has proven to be difficult to obtain. Most lenders/investors will not do these loans.
Please do not confuse these loan programs with the HAMP and HARP loan modification programs. I’ve had quite a few (a lot really) homeowners come to me after they tried to use the services of a “loan mod” company which advised them that the only way to qualify for a modification was to go delinquent on their payments, which made them ineligible for the above programs.
Find a mortgage professional you can trust and work with him or her to see if there is a solution.
singer on December 23, 2010 at 9:15 AM
If you had a $120,000 mortgage on a $200,000 purchase price ($80,000)in 2004, your home would have to be worth less than $50,000 for you to be truly underwater. If you are saying that your home is only worth $125,000 now, then technically you are not underwater as you could sell your home, pay-off the note and RE commission and walk away. Now it would be true that you’ve lost your investment (down payment) which included an investment gain from the previous home that you sold, but you are not underwater.
Equity is loosely defined as what your property is worth at any given time less what is owed at that time. Some people confuse this with “profit”. You never actually realize the gain until the property is sold or refinanced.
singer on December 23, 2010 at 9:27 AM
And when the plumbing system blows up, you get free plumbing and everything that is destroyed gets replaced on someone else’s insurance…
And you don’t owe the bank a penny and can get out of any lease for a relatively small amount of money… and you can change school districts or neighborhoods or city, county or state fairly quickly… you can even change landlords in a relatively short amount of time.
There are advantages on both sides
mankai on December 23, 2010 at 10:22 AM
Local paper nailed it this morning, noting the fall in sales. This is just like “Cash for Clunkers”, sales pulled forward to take advantage of market bending ‘incentives’.
GarandFan on December 23, 2010 at 10:41 AM
That is precisely what happened. I’m a R/E broker in the midwest and as much as I’d love more (heck, any) business, the use of these “incentives” hurts more than helps. We need a true “bottom” to work back from and that would require the feds getting the he** out of it.
Tim Zank on December 23, 2010 at 11:00 AM
I’d be happy if we got a President that STOPPED trying to run the nation.
TugboatPhil on December 23, 2010 at 11:08 AM
I would prefer if the federal government not got into the mortgage business at all: FHA, Fannie, Freddie, Ginnie.
These three have allowed the federal government to move into the home mortgage market and distort it via policies and securities that do not match up to markets. Plus, in becoming a lender, federal organizations (even the quasi-federal corporations since they act under the behest of the Congress) fall into a problem with ownership of lands in the States prohibited by Art. I, Sec. 8:
When the federal government is left with the property, it is in violation of this by not having the consent of the State Legislature for foreclosed property. And as it does not serve the listed federal purposes, it cannot be considered a constitutionally gained asset.
Fannie and Freddie are able to draw directly from the Treasury and have the backing of the federal government. If they were fully cut-off from that and wholly owned outside the government it would be a different deal – they would just be another set of lenders. How is it the federal government can be left holding the bag for properties in States without consent of the State legislatures per property? The government has a defined and specific ability unlike what the Left wants to do with the commerce clause, and with that definition comes boundaries. I would prefer that Fannie and Freddie get shut off from the Treasury, the FHA get disbanded and the government get out of rating loan securities packages… and then let lending banks that can’t stay afloat go under.
This stop-gapping is making things much worse than if the rule of law had been followed and TARP never passed. Now the pain is higher, but the remedy is still the same: let banks fail and get the federal government out of this venue completely. I want no President or Congress to set ‘housing policy’ – the American people are to set that directly by their purchases and sales and don’t need this ‘help’ which makes things worse.
These creatures need to go.
Stop the spending.
ajacksonian on December 23, 2010 at 12:04 PM
I do admit that would be an improvement.
Dark-Star on December 23, 2010 at 2:14 PM
I own my home, did the job in 14 years of hard work.
In my opinion your home is your lifeboat in life and only a fool touches their “nestegg” for something like a second car or boat. I know, I know, saving is so passé…
This my offend some people, so be it. I never worry about the “worth” of my home. Those who look at home as an investment are of the wrong mindset in my opinion.
gdonovan on December 24, 2010 at 6:01 AM
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