Daily Archives: July 7, 2010 @ 11:19 pm (Wednesday)

mtg apps for new purchases fall again

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Seems the fall off after the tax credit ended April 30th has yet to fully run its course:

US Mortgage Applications Soar on Refinance Demand

July 7th (Reuters) —Refinancing drove total U.S. mortgage applications to a nine-month high last week, while demand for loans to purchase homes sunk to a near 13-year low as buyers remained sidelined after the expiration of federal tax credits.

Mortgage rates stuck around record lows, the Mortgage Bankers Association said on Wednesday, giving homeowners another chance to cut monthly payments by refinancing.

Refinancing requests jumped 9.2 percent in the week ended July 2 to the highest level since May 2009, lifting total applications by 6.7 percent, seasonally adjusted, to the highest level since early October 2009.

Demand for mortgages to buy homes slipped 2 percent. It was the eighth weekly drop in the nine weeks since the federal tax credits for homebuyers expired on April 30.

“For the month of June, purchase applications declined almost 15 percent relative to the prior month and were down more than 30 percent compared to April, the last month in which buyers were eligible for the tax credit,” Michael Fratantoni, MBA’s vice president of research and economics, said in a statement.

The average 30-year mortgage rate was little changed in the week ended July 2, climbing 0.01 percentage point to 4.68 percent.

The borrowing rate lingered just above the record low of 4.61 percent set in March 2009, according to the MBA’s records that date back to 1990.

Fifteen-year mortgage rates rose to 4.11 percent last week from the record low 4.06 percent set the prior week.

Refinancings accounted for 78.7 percent of all applications last week, the highest share since April 2009, the industry group said.

Tepid employment growth and a surprisingly steep slump in pending home sales kept interest rates low.

Home purchases will stay weak over the next few months as the housing market adjusts to the end of government incentives, and prices should bottom around the third quarter, said Robert Andrews, senior research analyst at IBISWorld in Santa Monica, California.

Fallout from record defaults and foreclosures are also likely to sway many younger buyers from making such a big commitment in the near term, he said.

“People in my generation, people 20 to 30 years old, saw the downside risk associated with housing, so I think there’s going to be a bit weaker demand over the next few years,” said Andrews.

Refinancing, likewise, is unlikely to approach the levels seen last year when mortgage rates were near current levels.

Borrowers who could qualify for refinancing have in most cases already refinanced, most analysts agree.

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Sector Analysis Update

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Looks like the deficits got high enough in the US and Euro zone to reverse things, and I’d guess UK and Japan as well even though the charts don’t yet show the reversal because past deficits of this magnitude would have been more than sufficient and there recent data is showing signs of a turn.

This is all usually indicative of a multi year upturn, who magnitude depends on the extent private credit expansion kicks in.
In the past the ‘borrow to spend’ private credit expansions have been helped by a variety of ‘peculiar’ events, including the credit expansion due to sub prime and other housing frauds most recently, the dot com era’s borrowing to fund impossible business plans, the credit expansion driven by the S and L frauds in the 80’s, emerging market credit expansion before that, etc. etc.

This time might be different/less robust if credit expansion channels are kept honest and fiscal policy tightened.

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Non-Mfg ISM

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With deficit spending running at about 7% of gdp modest growth should continue, with the ‘hand off’ coming when private sector credit expansion kicks in, which could be a while.


Karim writes:

Slowing, but still firmly in expansionary mode.
15 industries expand, 2 contract, 4 unch.


What respondents are saying…

  • “The general upswing in the economy, albeit minor, has had a positive effect.” (Arts, Entertainment & Recreation)
  • “Pricing pressures continue to increase as we see the economy begin to improve. Orders are still lagging in our industry.” (Professional, Scientific & Technical Services)
  • “Slow pace, but better than last year at this time.” (Accommodation & Food Services)
  • “Funding issues and cash flow issues continue to affect public sector procurement. Almost all capital acquisitions have been suspended.” (Public Administration)
  • “We have seen a slight improvement in business activity over the past month.” (Wholesale Trade)


June May
Composite 53.8 55.4
Activity 58.1 61.1
Prices Paid 53.8 60.6
New Orders 54.4 57.1
Employment 49.7 50.4
Exports Orders 48.0 53.5
Imports 48.0 56.5
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