A 3% drop in weekly mortgage applications apparently attributed to a slight rise in interest rates. Long-term rates rose as mirrored by the index increasing to 570.8 in the week ending October 27 from the prior week. The average 30-year rate hit 6.36 percent October 20 as compared to a 6.18% rate in mid September.
Good news for those applying for mortgages. Mortgage rates sunk to 6.18% with the benchmark 3-year fixed rate mortgage indicator, ending November 22. The rate had been 6.24% one week earlier and a year ago it stood at 6.8%.
Applications for new home buyers slid 2.8% and applications for all mortgages fell 3.7% for the week of November 17th.
Mortgage applications rose 8.1% and refinancing applications surged. The 30-year fixed rate mortgage fell 15 basis points to 5.98% last week which was the lowest since October 2005.
Home builder stocks rose on the data which was further fueled by a Toll Bros., the luxury home builder. Report that they anticipate a market bottom. Additionally, Citigrop upgraded the home builder stock sector.
Mortgage applications rose 3.2% in the week ending February 23 and were up 8.8% vs. the same week last year according to Mortgage Bankers Association. The average rate for 30-year fixed rate loans fell to a 7-week low of 6.16%.
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.
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.
