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- More people filed applications to take out a mortgage in the past week. Applications for buying a home rose 3 percent from the prior week. They are still down 11 percent from one year before.
- Refinance activity also got a boost by 3 percent as the mortgage rates touched down to the lowest of the year. From a year ago, however, refinances are down by 25 percent.
- Mortgage applications do not always directly correlate with home sales. First, applications do not mean approval. Second, cash-sales can pump up home sales when mortgage activity remains flat, for example. Third, there are always sampling errors from measurement techniques. With these factors in mind, home sales this year have been running below last year’s figure by only about 5 percent. The declines occurring in mortgage purchase applications have been much larger, at 15 to 20 percent.
- In the most recent months, there has been a slight decline in cash-sales as real estate investors have slowly begun to step out of the market.
- It has been a tough year for mortgage brokers. The latest week’s modest upturn is therefore welcomed. However, mortgage brokers should not expect consistent increases. Refinances will soon collapse again when interest rates inevitably turn for the worse. Mortgages taken out for buying a home will likely rise because of job creations, but only slowly and not enough to compensate for the declines in the refinance business.
- New mortgage regulations, such as the Qualified Mortgage Rule, could be hindering more loans from getting approved. Also FHA has greatly increased premiums, thereby punishing current borrowers for the sins of past borrowers, just when the default rates of current borrowers have significantly fallen. On top of this the large banks are getting hit with fresh lawsuits from the U.S. Department of Justice running in the billions of dollars. The big banks are quickly forking over the money without admitting guilt in order to shoo-away the government. That means a large cash reserve is being set aside for legal risk and not being recycled back to consumers. A strange world we live in where banks are flushed with cash, yet banks are unwilling to do the business for which they were set up to do.
