Housing: Mortgage Applications Plummet

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Housing prices, already under pressure because of unemployment and the number of defaults, are likely to continue their drop. There are fewer and fewer buyers in the market. And, the federal government’s tax credits expired at the end of the month.

The Mortgage Bankers Association presented fresh evidence that the number of people purchasing houses is continuing to fall off.In its weekly mortgage report, the MBA writes

“Purchase applications plummeted 27 percent last week and have declined almost 20 percent over the past month, despite relatively low interest rates.  The data continue to suggest that the tax credit pulled sales into April at the expense of the remainder of the spring buying season.  In fact, this drop occurred even as rates on 30-year fixed-rate mortgages continued to fall, and at 4.83 percent are at their lowest level since November 2009,” said Michael Fratantoni, MBA’s Vice President of Research and Economics

The numbers are unprecedented, at last for period that goes back over a decade:

The seasonally adjusted Purchase Index decreased 27.1 percent from one week earlier.  This is the lowest Purchase Index observed in the survey since May of 1997.  The unadjusted Purchase Index decreased 27.0 percent compared with the previous week and was 24.1 percent lower than the same week one year ago.

A Treasury Department report released early this week showed that HAMP was failing to modify any meaningful number of mortgages, despite its goal of giving permanent relief to three to four million troubled home owners. The April report on the program said 230,801 trial plan modifications through HAMP have been converted to permanent status.  Recent RealyTrac figures show that foreclosures are on a pace to hit a record high this year.

Under the circumstances, it is a wonder that the Administration did not renew the home buyer tax credit. It appeared to be the only incentive that brought a significant flow of buyers into the market.

Douglas A. McIntyre