Mortgage applications rose recently, as low interest rates have spurred interest in mortgage modifications. Image from Wikimedia Commons.

Mortgage applications have risen over the past month, largely thanks to more people applying for mortgage modification. Low interest rates make modifications more attractive than purchases. However, prospective buyers are still apprehensive because home values continue to fall.

Low interest rates fuel spike in mortgage activity

Months of low interest rates have caused a spike in mortgage activity, according to Bloomberg. Mortgage applications rose by 15.5 percent during the week that ended March 4, which is the largest increase in mortgage activity since June 11 of 2010. Mortgage applications declined 6.5 percent during the same week in 2010. However, applications for mortgage modifications fueled the bulk of activity, 65.5 percent of total mortgage application volume, up from 64.9 percent the week before. The Mortgage Bankers Association reports that the purchase index rose by 12.5 percent from the week before, but the MBA does not differentiate applications for purchasing existing homes or new homes. The sale of existing homes makes up about 90 percent of all home sales.

Home values continue to plunge

Home prices have declined 31 percent since prices peaked in July 2006, and there is rampant speculation that a double dip in real estate is possible. One of the leading proponents of the idea that a double dip is pending is Robert Shiller, co-founder of the Case-Shiller Index, according to CNN. Shiller believes home prices will continue to fall, and the fact that home sales dropped during January 2011 certainly means it is possible. Unfortunately for most middle class prospective home buyers, taking advantage of lower prices is going to become more difficult over the next few years as financing standards are about to change.

Fannie and Freddie may take 30 year mortgage with them

The government has expressed interest in getting rid of Fannie Mae and Freddie Mac. Fannie and Freddie create capital for lenders by purchasing mortgages and selling them to investors, keeping the mortgage industry flush with cash for new loans. Should the mortgage houses be done away with, the 30-year fixed mortgage may go with them, according to the New York Times. A 30-year loan with fixed interest is a risky venture, as the lender cannot see the future. Few people pay off the loan or stay in the same house for 30 years. It is likely that within the next decade, adjustable rate mortgages will become the norm, as investors will want to be able to adjust interest rates to the market. Larger down payments will likely be required, and interest rates will be higher.

Sources

Bloomberg

Mortgage Bankers Association

CNN

New York Times

Foreclosures rose during the past few months, but the number of mortgage delinquencies declined. Image: Brendel/Wikimedia Commons/CC-BY

The number of mortgage delinquencies has declined, but the number of foreclosures has risen. Though loan lenders can rejoice over more borrowers making payments, the inventory of foreclosed properties is at a record high. However, this may be a sign that foreclosures will slow in the future.

Foreclosure inventory nears all time high

The number of foreclosed properties loan lenders retain has hit an all time high, according to Bloomberg. A report was recently released by the Mortgage Bankers Association detailing the economic trends in real estate, and the number of foreclosed homes had risen to 4.63 percent of all mortgages at the end of the fourth quarter of 2010, which ended Sept. 30, 2010. The number of foreclosed properties is nearly the highest on record.  That figure had risen from 4.36 percent at the end of the third quarter of 2010. At that time, nearly 14 percent of all mortgage loans, or one in seven, were in foreclosure or homeowners were behind on payments to their loan company.

Delinquencies decline

Though the number of foreclosed properties has risen, the number of delinquencies has fallen. From July to December, 2010, the number of bank loans that were one payment behind dropped from 9.13 percent to 8.22 percent, according to CNN. Mortgage delinquencies have therefore dropped to the December 2007 rate, which marked the beginning of the recession. Seriously delinquent loans, or mortgage payments at least 90 days past due, declined from 5.02 percent in March of 2010 to 3.63 percent in December, 2010. This means more people are getting payday cash, and able to make payments.

Foreclosures stalled for now

The controversy over improper foreclosure procedures, or the “robo signing” affair, has led to a temporary slowing of foreclosures, but that may reverse itself as those issues are resolved. Florida is still the state most affected by foreclosure, with more than 14 percent of all homes in foreclosure. Mississippi had the highest delinquency rate, with 13.3 percent of homes behind at least one payment.

Sources

Bloomberg

CNN

Mortgage rates have been rising in parallel with private sector job creation, existing home sales and consumer confidence. Image: CC erion.shehaj/Flicr

Mortgage rates rose for the third straight week, according to both the Mortgage Bankers Association and Freddie Mac. Rising mortgage rates are accompanied by positive numbers from private sector job creation, existing home sales and consumer confidence. As mortgage rates rose after a prolonged period of historic lows, mortgage refinancing activity dropped off a cliff.

Mortgage rates still lower than last year

Fixed mortgage rates rose again this week as economic data showed the economy may turn out being stronger in the fourth quarter than the third. Freddie Mac reported that the rate on a 30-year fixed-rate mortgage averaged 4.46 percent as of Dec. 2, rising from 4.40 percent the week before. A year ago the fixed-rate mortgage averaged 4.71 percent. Rates for 15-year fixed-rate mortgages and adjustable-rate mortgages also rose from last week, but they remain considerably lower than they were at this time last year. Getting the average fixed-rate mortgage rate required a down payment of 8 percent of the mortgage amount charged as pre-paid interest.

Signs of economic recovery

The positive economic news driving mortgage rates higher includes employment, even though the jobless rate rose to 9.8 percent in the latest jobs report from the Labor Department. November private sector job creation was the highest in three years and has grown for 10 consecutive months. Markets interpret that as a positive outlook going forward. A report on pending existing home sales showed an 11 percent increase, even though prices still trend downward. The consumer confidence index also jumped to 54.1 percent in November, which showed with a surge in holiday spending.

Mortgage refinancing takes a hit

A side effect of rising mortgage rates is the apparent end to a mortgage refinancing window that homeowners took advantage of to the tune of nearly $1 trillion. Many people who may have thought they could benefit from record-low mortgage rates appear to be no longer interested in refinancing. The Mortgage Bankers Association reports that the volume of mortgage refinance applications dropped 21.6 in the last week.

Sources

Wall Street Journal

The Chicago 77

Christian Science Monitor

Real estate may be a veritable desert, but there are some signs of life. Image from Wikimedia Commons.

The housing market in the past year has been a series of small hits and big misses. Banks, buyers, sellers and real estate agents alike are awaiting a return to at least some decent activity. Some signs of life are beginning to show. There was a recorded uptick in the number of new mortgage applications for purchasing a home. Not only that, but applications for loan modification dropped a little bit. However, applications to modify existing loans into low cost loans, or at least lower cost, are still the bulk of mortgage activity, which is significantly low.

New mortgage applications increase

The number of mortgage applications for the purchase of a new home has increased. The Mortgage Bankers Association recorded an increase of 6.3 percent in applications for a purchase, according to Reuters, which is the first significant increase since May of this year. However, it isn’t exactly great news. An increase is an increase, but the number of applications turned in to loan lenders for a home loan is at record low levels. Mortgage loan applications rates are down about 40 percent since May 2009.

Modifications are the bulk of activity

The vast majority of mortgage applications are still for mortgage modification. Applications for a modification dipped 3.1 percent, a slight decrease since May of this year, but modification applications made up almost 82 percent of all mortgage applications. Currently, mortgages of nearly any configuration are low interest loans, as the rate for 30-year fixed mortgages is at 4.5 percent, a 20 year low. The MBA started calculating these statistics in 1990, and the current rates are nearly the lowest they have ever been. The low rates make for a great opportunity to refinance. However, since finance loans are so much harder to access, it is difficult for many to reap the benefits.

Little stimulated

The stimulus seems to not have worked. As the tax credit only managed to temporarily propped up home sales, and the federal refinance program barely works, it seems that the recovery to housing must come from below. More people will need to be working for housing as an industry to have a chance.

Sources

Reuters