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Lower mortgage rates lead to surge in mortgage applications
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Mortgage applications were up 17% last week, led by loan refinances, but purchases were up the most in 7 months. Purchasers were predominantly first time buyers. The “move up” buyer has remained notably missing from this equation.
Rates on 30 year fixed rate mortgages dropped to an average of 5.02% nationwide – which is down .13% from the previous week, and is the lowest level since May 22. The all time low rate was 4.61% seen in Mar 2009.
In spite of the lack of move up buyers, there are signs that the housing market is stabilizing, with increasing numbers of sales, and home prices actually starting to rise in some areas while declines are not nearly as steep as earlier.
The concern is how many more foreclosures are still in the pipeline – whether or not banks are holding inventories of foreclosed homes that have not been released on the market. Many banks are working behind the scenes with investors and are not releasing homes on the market unless their behind the scenes investors are uninterested in those homes. Is this a sign that the less desirable “foreclosed” homes are the ones hitting the market, while the nicer homes are being purchased by investors and flipped for profits?
Most analysts surveyed agree that government buoying of mortgage rates and other stimulus, such as the $8000 first time home buyer’s credit must be continued in some form, to keep this fragile housing recovery on track. Realtors and home builders are aggressively lobbying Congress, now that they are back in session, for a continuation of the first time home buyer credit, or even more desired would be a tax credit for all home buyers, to bring back the move up buyers.
Looking for a really good deal on housing? Bernie Madoff’s penthouse could be yours for as little as $10M. It will be going on the market this week. The Palm Beach mansion is also expected to go on the market later this week, and the beachfront home in Montauk, Long island is apparently gaining a lot of attention from prospective buyers, after it was listed last week.
Total consumer credit use dropped by 10.4% in July at annual rate of $2.47 trillion. This was much more than analysts’ expectations for a $4.0 billion drop, and an indication that at current rates, household spending would be too weak to drive the economy’s recovery from this recession. Consumer spending accounts for 2/3 of the US economic activity. Consumer credit use has declined for 6 straight months. The last time this happened was the period from June 1991 – Dec 1991. It remains to be seen how these numbers might affect the housing recovery. Could it mean that consumers have stopped spending so aggressively in order to save money to purchase a house? Remember that there are considerably fewer 100% financing options available now, which eliminates many potential home buyers in this market.
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