Loan Rates and Applications Dip

Cited: NewsDaily

An industry group reported that US mortgage applications slid the last week of August even though mortgage rates edged lower. Even requests for loans to buy homes declined for the first time since July. The applications index fell by a seasonal adjustment of 2.2% as the demand for both purchase and refinance loans slipped according to the Mortgage Bankers Association. Even 30 year fixed mortgage rates that average 5.15% were down 0.09% points. However, this is still above the record low of 4.61% that was set in March. A year ago the borrowing cost was 6.39%

Stability has seemingly returned to the three-year housing market that has endured the deepest crash since the Great Depression. The view that the worst may have passed is gaining traction. Pending home sales, based on contracts signed in July, jumped 3.2% to a two-year high, the National Association of Realtors reported on Tuesday.

Economic stimulus that has boosted consumer optimism, signs that home prices have neared a bottom, and federal programs such as a soon-expiring first-time home buyers tax credit have turned more fence-sitters into house purchasers, industry experts said.

The NAR estimates that as many as 2 million first-time buyers will use the tax credit this year, and about 350,000 sales would not have occurred without it. Buyers need to close their loans by November 30 to qualify. Sherry Chris, president and chief executive of Better Homes and Gardens Real Estate in Parsippany, New Jersey, expects a rush of applications in the waning weeks of the tax credit.

Once that phase passes, “if we see the continuation of the slight upturn that we’re experiencing now, that to me will indicate that the market has in fact turned and we’ll begin to see an upswing,” she said. “We have a couple months of waiting to see if we’ve truly turned the corner.”

The first-time buyer’s market has been robust, but not the move-up market — or the market for existing homeowners looking to trade up to a larger home. It will take consistent news of rising home prices to lure the move-up buyer, most realtors agree.

“There are a lot of people talking about the worst being behind us,” said Chris, who calls herself cautiously optimistic. “There are so many other factors involved: the economic conditions, unemployment, consumer confidence.”

The U.S. unemployment rate is expected to have risen to 9.5% in August, after declining in July for the first time since April 2008, according to a Reuters poll. The jobless rate had reached a high last seen nearly 26 years earlier. The Mortgage Bankers Association said its purchase loan applications index dipped 1 percent to 277.6 last week. The last time this measure fell was in the July 10 week, when it was about 7% lower at 258.8.

The industry group’s refinance index fell 3.1% last week to 2,164.1 after rising two straight weeks. Still, this measure of refinance demand was around three times stronger in the spring when mortgage rates toppled to a record low. Only the government purchase index rose last week, the MBA said. The 0.5 percent rise put the seasonally adjusted index up for the seventh straight week.

The government-insured share of mortgage purchase applications rose to 40.4% in August, the highest since February 1991, the group said in a release. Loans insured by the government typically require lower down payments than other mortgages.

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My Take: You know, I am so tired of hearing about how low the interest rates, down payments, availability etc. are of mortgages. I will never be able to afford to buy my own home. Not unless I am able to invent a time machine and go back 50 years. I tried to get a house once, about 30 years ago, and I had to try with a rent-to-own option.

Let me tell you, it was a fantastic deal! I would have been paying $550 a month and I was paying that much more than that in rent and utilities. Then I was given the rest of the information. After one year, the payment would do what $1200 a month. There was no way I would ever be able to afford $1200 a month when I was making $1400 a month in income.

Now, because I am disabled, I make less than $1000 a month in disability and if I am lucky, I can earn about $300 more over the Internet. There is no way I could ever come up with a down payment or afford the monthly payments for housing are going for in today’s market even with the reductions. Maybe I will get lucky and win the lottery!

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