Tax-credit deadline passes, mortgage applications swoon
You didn't need to wait long for a sign of what the end of the home buyer tax credit program means: Mortgage applications by buyers fell 27 percent last week -- following a 10 percent drop the week before -- to their lowest level in 13 years.
"The data continue to suggest that the tax credit pulled sales into April at the expense of the remainder of the spring buying season," Michael Fratantoni, the Mortgage Bankers Association's vice president of research and economics, said in a statement this week.
It's been mostly downhill for new-purchase mortgage applications since 2005, as this chart shows, but the figures did spike last fall (when the credit was originally set to expire) and again more recently.
Refinance applications did rise nearly 15 percent last week as homeowners tried to take advantage of dropping mortgage rates. (Refi requests accounted for two-thirds of all applications.) The average interest rate for a 30-year fixed rate mortgage was about 4.8 percent that week.
As columnist Eileen Ambrose notes, experts are thanking/blaming fears about financial instability in Greece for the low U.S. mortgage rates. Investors, seeing U.S. Treasuries as a safer bet than European debt, are parking their money there, "and the demand pushed down long-term interest rates that influence the 30-year fixed rate mortgage," Ambrose writes.
Financial publisher HSH Associates says the downward trend has continued: "After setting 2010 lows last week, mortgage rates managed another downshift this week and are once again near historic -- approximately 50-year -- lows."
Any deep thoughts to share on rates or the pipeline of future buyers?
Categories: First-time buyer tax credit, Mortgage rates, Mortgages, Repeat buyer tax credit
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Comments
Without buyers, low rates will have very little effect or impact in the housing market and broader economy. Rates have been low for over a year now. The majority who wanted to refinance have done so already. Who is left that hasn't refinanced? People that are in foreclosure or can't qualify due to loss of income, underwater, insufficient assets, etc.
Even if applications for refinances go up, it does not necessarily mean the loan is going to close. As far as purchases go, we all predicted this would happen. That should come as no surprise to anyone. As less people are in the market to buy a home, where do you think home prices are headed? Even if rates remain low, is that really enough to justify buying homes that are still overpriced? Why are high prices so desirable? Let the free market work.
Prices need to fall another 20%. All of this stimulus, tax credits, subsidies, propping up the market, etc. hasn't worked for the past 3 years. Government interference is only prolonging the process. Instead of feeling the pain in a short period of time, the pain is being extended over a longer period of time.
Posted by: Frank Rizzo | May 22, 2010 5:04 PM
Rates are low and will continue to be low for the remainder of the year. I expect to see a renewed emphasis on refinancing. Until the job numbers get better, the real estate market will remain in the dumpster. When unemployment reaches around 8.5% consumers will begin spending on real estate. People are concerned about keeping a job, or finding a job.
Another issue is approvals. With tighter underwriting guidelines, it is difficult to qualify for a mortgage.
Posted by: Laura Morton | May 23, 2010 12:41 AM
Interest rates have a hit an all time record low this week. The lowest rates available today, according to Bankrate.com, is 4.375% / 4.457% APR for a 30 Year Fixed mortgage with ZERO points. That’s amazing! Anyone who hasn’t refinanced in the past 2 years and/or has a rate higher that 5.5% should consider contacting their local lender or bank to see what loan options are available for them. With products that allow for up to 105% LTV, hopefully there’s a way for homeowners to lower their payments.
I will agree with Laura’s comment, getting a loan is hard than it’s been in previous years, but as loan as you have decent credit (620+ score), no mortgage lates, verifiable income, and some equity, there’s should be a program available for you. The hardest part of obtaining loan in my option, is getting the home to appraise. With the implementation of HVCC, appraisal quality has deteriorated, but that’s another lengthy conversation.
Posted by: Sarasota Mortgage | July 30, 2010 1:16 PM