The mortgage activity rate sank 5.5% in the week ending October 6, 20006. This all after surging to a 9 month high in the prior week according to the Mortgage Bankers Association. Mortgage rates shot up this week which probably dampened demand.
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Mortgage applications are beginning to rise, however existing home sales are lackluster. The number of homes available for sale is decreasing which is a positive indication that the market is stabilizing. The 16% drop in mortgage activity for the first half of 2006 was heavily influenced by non-traditional loans. Strong demand for interest only options was an influence.
The Federal Reserve FOMC (federal open market comittee) meeting left interest rates unchanged at their meeting Tuesday, October 26, 2006. Not withstanding Lehman Brothers prediction that the Fed will have to tighten by at least another quarter point to stem inflation pressures, Federal funds futures give no indication of any coming rate hike or cut for the next several meeting. The cooling of the housing market was indicated a prime factor in the no change vote.
On the defensive side, one of the largest mortgage lenders is cutting 2,500 jobs to weather out the housing slump. Hoping to save $500 million, Countrywide is cutting down its labor force.
However, the second home market has seen activity with the baby boomers. A recent survey shows future growth in second homes due to the sheer size of the baby boom generation.
Mortgage rates fall once again as the 30- year fixed-rate mortgage rates move down. Rates have fallen for the 10 of the last 11 weeks according to Freddie Mac.
The 5-year adjustable mortgage stayed at 6%. The 1-year ARM averaged 5.46%, which is a 6-month low.
Notwithstanding, mortgage application index soared to its highest level since January. The activity shot up 17% according to the Mortgage Bankers Association.
Meanwhile, job growth is seen as sluggish even as jobless claims fall for the 4th drop in five weeks. Private employers added 78,000 jobs in September. U.S. factory orders were flat in August and CEO’s are gloomy on future of the economy. The Business Council and Conference Board said that 45.6 % of the CEO’s polled expect the economy to worsen over the next 6 months.
One of the largely unreported white collar crimes in the mortgage business is that loan officers inflate the income of marginal buyers so they are approved to buy a home they can not possibly qualify for.
Greed on the part of the buyer for supposedly inflated home valuation and greed on part of the mortgage lender for a juicy commission. The bank regulators looked the other way, the mortgage higher ups tacitly approved the practice and now with a declining real estate market buyers are bailing out in droves. Foreclosures are rampant.
Unsuspecting investors buy these mortgage obligations from brokers assuming they bought a sound investment. For instance Goldman Sachs , one of the top sellers of C.M.O.’s (collateral mortgage obligations) for the past few years sold about $100 billion to unsuspecting investors.
With the real estate decline, the bubble popped and everyone is looking for a scapegoat.
The real cause is the mortgage scams and lack of enforcement in inflating mortgage applications at the entry level. With the interest only mortgage obligations, greed on part of all parties involved perpetuated the fiasco.
A Harvard study show a more upbeat view of the current housing market value correction than offered by most economists. All hinges on the course of employment growth and interest rates. The run up in housing demand over the years is buoyed by the huge increase of immigrants and their children and relatives. That trend should continue for the foreseeable future.
Both political parties are paper tigers when it comes to immigration reform. The situation is not like it was with most 2nd generation immigrants parents who had to go through strict Ellis Island immigration standards.
The number of foreclosed home returning to the market is having an effect on builders and investors. Home market values should continue a downward trend as the growing problem of affordability strengthens. The downward pressure on wages due to the large influx of immigrants is taking its toll. High housing cost and non-housing expenses leaves home ownership on a slippery slope.
Mortgage rates have remaind stable due to the Federal Reserve not raising interest rates. The pre-owned single family home sales market is soft this seaon. Subprime lending and adjustable rate market find many battling foreclosure because of greed for home ownership and premium interest rates. Consumers with poor credit and financial flaws put themselves and their banks in risk.
Prices are going raising as the cost of living goes up. Property values shrinking, wages and the job market is still decent. The burden of local, state and the federal government are spending money like drunken sailors and it's only the American fighting attitude that keeps the working guy/gal able to continue. We all know that consumer inflation is far higher than the 2.1 percent official CPI inflation rate. Politicians are “cooking” the books. Eventually the markets will self-correct, but will we ever get spend-thrift politicians?
