Low rates aren’t enough
According to the Mortgage Bankers Association’s Weekly Mortgage Applications Survey, mortgage applications dropped 4.3 percent from the week prior and is 12.1 percent lower than the same week in 2010. Last week, the conventional 30-year fixed rate mortgage averaged 4.01 percent, down nearly an entire percent from the week prior, but buyers weren’t swayed by the low rates, continuing to be discouraged by the overall economy and fear of qualification as well as job stability.
“Interest rates continued to fall last week, driven by the latest Federal Reserve actions to invest in longer-term Treasury and mortgage securities, but potential borrowers largely remained on the sidelines, seemingly unimpressed by the lowest (by any measure) mortgage rates since the 1940s,” said Mike Fratantoni, MBA’s Vice President of Research and Economics. “Refinance application volume declined and purchase volume was little changed. Purchase borrowers continue to value the government lending programs that permit lower downpayments. The government share of purchase applications decreased slightly to 41.6 percent last week, and while this is down from a recent peak of 50.4 percent in April 2010, it is still well above the pre-2009 survey average of 23.6 percent. Many refinance borrowers are opting to deleverage by moving to a 15-year term, with this product accounting for 27.0 percent of refinance volume last week.”
Refinance loans accounted to 79.1 of all mortgage application volume, down 0.6 percent from the week prior and in August, half of all refinance borrowers applied for 30 year fixed rate mortgages and the volume of 15 year refinance loans is at its highest point for the year. Home purchase applications were almost all 30 year fixed rate mortgages, at 90.1 percent, marking the lowest level of adjustable rate mortgages applied for this year.
With unemployment and underemployment continuing to plague the economy, potential borrowers are pensive regardless of attractively low loan rates and near WWII levels. Mortgage application volume is often used as a forward looking economic indicator of future sales contracts and ultimately of future closed transactions, with this overall dropping volume causing some to question whether or not real estate has hit the bottom yet.