John Rebchook is a former Rocky Mountain News reporter with more than 30 years of experience in writing and communications... Refinancing activity has taken its first weekly drop in six weeks, while loan activity is down almost 40 percent from a year ago, shows a national report released today.
The Mortgage Bankers Association said that refinancing activity fell by 3.1 percent on the week ending on Sept. 3, while home-purchase loan activity was down 38.8 percent from a year ago.
“Purchase applications increased last week, reaching the highest level since the end of May,” said, Michael Fratantoni, MBA’s Vice President of Research and Economics. “However, purchase activity remains well below levels seen prior to the expiration of the homebuyer tax credit, and is almost 40 percent below the level recorded one year ago.”
And while refinance volume dropped last week for the first time in six week, “the level of applications to refinance remains close to recent highs, as historically low mortgage rates continue to draw borrowers into the market.”
Refinancing continue to drop
Peter Lansing, president of Universal Lending, a sponsor of this site and the chairman of the Colorado Mortgage Lenders Association, said he expects that refinancing activity will continue to drop, despite rates at or near historical lows.
A 30-year-fixed mortgage is averaging about 4.3 percent now, compared to about 5 percent a year ago. There is about a 10 percent chance rates will go even lower, and a 90 percent chance they will rise, Lansing estimated.
But even if rates drop slightly, Lansing doesn’t think that will fuel a frenzy of refinances. “I think what has happened is that we are working through the bubble of people who can refinance,” Lansing said.
Lansing said that many people who have jobs, good credit, equity in their homes, and interest rates high enough to warrant refinancing, either have refinanced or are in the process of getting a lower rate.
“We are going to come out on the other side of that bubble,” Lansing said. “I think that refinancing applications are going to continue to go down, and no matter whether rates drop further, in 60 days or so, it is going to more or less be over. There will be nobody left to refinance.”
Culprit: No consumer confidence
Lansing, and many others, said that a lack of consumer confidence is driving force that led to almost a 40 percent drop in buying activity from a year ago.
“You can blame it on jobs, but, overall, about 91 percent of the people still have jobs and about 9 percent are unemployed, when you look at the national averages,” Lansing said.
“But what I think it really all comes down to is consumer confidence,” Lansing said. “Consumers are worried about things like a double-dip recession. People don’t have the confidence to buy big-ticket items like homes. I’m sure that is reflected in other large-ticket items like automobiles.”
Stimulus gone
Also, the tax-credits of up to $8,000 required homes to be placed under contact by April 30 and closed by the end of this month.
“There is no stimulus,” Lansing said. “The demand is gone that was created by the stimulus. All that a stimulus does is tell you now is a good time to purchase something; it gives you a higher-than-normal opportunity to purchase it. The stimulus package is gone, and now, more and more people are saying that the government should stop with its stimulus packages. More people are saying do not stimulate anything,” and let the economy run its normal course, without taxpayer dollars.
Contact John Rebchook at JRCHOOK@gmail.com
Do you think this might also have something to do with the HVCC bill? We were trying to refinance and were assigned an appraisor unfamiliar with our neighborhood. She appraised the house too low for us to refi without mortgage insurance. Her appraisal came in $44,900 below the offer we received a month or two before (her appraisal was subsequently $65,000 less than the 2008 appraisal). I’m wondering if this drop is a consistent percentage that the Denver metro (Broomfield) area has seen? She also used a short sale as a comparable property when our neighborhood is not one full of foreclosures or short sales. There’s literally nothing we can do to get a second opinion b/c she is a one woman shop. Or is there?
HVCC in some form is hear to to stay. It works much better than the old way of doing things when a loan broker calls his brother in law who also knows nothing about you neighborhood and over values the home to allow for more cash out. This is one big reason we got into this mess.