This Week in Real Estate 05 October 2011: Economic Turbulence Enters Real Estate

October 5th, 2011
in econ_news

Econintersect:  Uncertainty freezes deer in the headlights.  It is obvious even to a moron that there is something unsettling in the economic events they are witnessing.  The Mortgage Bankers Association (MBA) Mortgage Applications Survey for the week ending September 30, 2011 showed mortgage applications declined 4.3%.

“Interest rates continued to fall last week, driven by the latest Federal Reserve actions to invest in longer-term Treasury and mortgage securities, but potential borrowers largely remained on the sidelines, seemingly unimpressed by the lowest (by any measure) mortgage rates since the 1940s,” said Mike Fratantoni, MBA’s Vice President of Research and Economics.

Follow up:

“Refinance application volume declined and purchase volume was little changed. Purchase borrowers continue to value the government lending programs that permit lower down payments. The government share of purchase applications decreased slightly to 41.6 percent last week, and while this is down from a recent peak of 50.4 percent in April 2010, it is still well above the pre-2009 survey average of 23.6 percent. Many refinance borrowers are opting to deleverage by moving to a 15-year term, with this product accounting for 27.0 percent of refinance volume last week.”

The refinance share of mortgage activity decreased to 79.1% of total applications week-over-week (from 79.7%).  It is interesting to note the summary borrowing data released by the MBA for August 2011:

In August 2011, among refinance borrowers, 50.7 percent of applications were for fixed-rate 30-year loans, 31.0 percent for 15-year fixed loans, and 7.1 percent for ARMs. The 15-year refinance share is at its highest point since the survey was re-benchmarked in January 2011. For applications for home purchase, 90.1 percent were for fixed-rate 30-year loans, 7.7 percent for 15-year fixed loans, and 6.6 percent for ARMs. This is the lowest ARM share for purchases since January 2011.

The average contract interest rate for 30-year fixed-rate mortgage decreased to 4.18% from 4.24%.  Hat tip on the following graphic from Calculated Risk.

Altos Research this week highlighted that the new FHA loan limit changes were effective 01Oct2011.

“The new “ceiling” loan limit for higher cost areas will be reduced from $729,750 to $625,500 for one-unit properties. FHA loan limits vary based on area median home price, but all will fall within the range of $271,050 and $625,500 for one unit properties.”

Altos Research noted that the upper end price tiers have been adjusting their ask prices since the early Spring in anticipation of the FHA Loan Limit changes.

source: MBA, Calculated Risk, Altos Research

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1 comment

  1. Chuck Szkalak says :

    Bernanke should be in jail for corrupt cronyism. The latest "twist" is just another bailout. Bernanke will be buying trash mortgages from the "too big to fail" criminals, transferring debt from the banksters to the US taxpayer. The problems can not be fixed until the basic corruption is cleansed from the system. For such a cleansing serious and violent social unrest will be required.

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