Wednesday, October 12, 2005

Mortgage Applications Drop Again

Mortgage applications fall

Mortgage applications dropped again this week, down the third week in a row, here are some snippets from the article:

"The Mortgage Bankers Association said its index of mortgage application activity for the week ended October 7 slid 2.6 percent to 694.8 -- its lowest level since mid-April."

"The MBA's purchase mortgage index fell 0.9 percent to 469.5 from prior week's 473.8. The index, considered a timely gauge on U.S. home sales, declined for a fourth consecutive week to its lowest level since May 27."

"The ARM share of activity decreased to 29.5 percent of total applications last week from 29.8 percent the previous week. ARM demand reached a 2005 high of 36.6 percent in late March."

The last quote gave me the shivers, over a quarter of all mortgage applications right now are adjustable rate mortgages. With all the fed talk of pushing short term rates lately, the bond yields have been moving upwards (Greenspans conundrum), and it's only a matter of time before the squeeze forces mortgage rates upwards. I believe we'll see at least a quarter point hike at the next 3 meetings chaired by Mr. Greenspan.

With home prices at stratospheric levels, rate hikes long into the future (I believe we'll see 7% 30yr rates next year), and much tighter bankrupcy laws, it's a wonder why anyone would put themselves into a position like this.

As far as the drop in activity, the measure is nationwide, so take it with a grain of salt, however, it does match with the drop in sales activity many of us have been seeing lately (this is beyond the typical fall/winter decline).

-grim

19 Comments:

Blogger grim said...

Interest Rates: Still a Way to Go


"We believe September's inflation reports should confirm that trend, giving further ammunition to the Federal Reserve to continue its current tightening trajectory. We look for the Fed to raise rates by 25 basis points at its next three policy meetings, bringing the Fed funds target rate to 4.50% by the end of January."

grim

10/12/2005 08:02:00 AM  
Blogger InvestorDavid said...

"ARM demand reached a 2005 high of 36.6 percent in late March."

My God, 36.6%?

Most ARM/IO "grace period" is about 5 years and ARM/IO has been popular during past 3 years. 2 years from now, there will be blood bath.

So am I correct in believing that by Fall of 2007, the market will tank 30% below the current price?

Or will it come sooner due to proliferation of Internet/information and transparancy?

10/12/2005 08:03:00 AM  
Blogger Richie said...

How about this for discussion.. There was an article on MSNBC about "fraud" in the RE market (no way!)..

http://www.msnbc.msn.com/id/9653688/

I'm sure this affects tons of people today.. Who's to say these mortgage brokers aren't fudging data so they can make a quick sale and sell their loan to another company to make some quick $$$. What about the appraiser who gets pressure from the seller to make their home worth more then it is?

I think the mortgage industry is to blame for a lot of this; they've become much too lenient these days. To require little deposit on a home is ridiculous; going in with negative equity is just scary.

-Richie

10/12/2005 08:08:00 AM  
Blogger pascackvalley said...

Hey Grim, I saw your post over on nj.com. I do not know if you know it or not, but somebody had it deleted.

People in Bergen Co do not want to hear about a real estate bubble. They are in denial as inventory piles up. And the talk is over of bidding wars, and all the rest, while price reductions are becoming common place now.

Bergen county SF homes for sale, increase by 200 from last Friday to yesterday.

10/12/2005 08:27:00 AM  
Blogger grim said...

Natural Gas Prices

"AGA's member utilities predict average natural gas bills for their customers will be 30-40 percent higher this winter compared with last year, much lower than the federal government's estimate of a 50-70 percent increase, the trade group said."

"Nonetheless, Roger Cooper, AGA's executive vice president for policy and planning, said: "I would look for gas bills going up 50 percent this winter.""

I'm seeing stories all over the wires about Nat. Gas providers informing customers of the upcoming spike in utilities prices. For new homeowners in their new McMansions, winter utility bills are going to be a big shock. If consumers keep spending at their current rates, these increases will further erode savings in the upcoming months. I wonder if we're going to hit a new personal savings rate low come Jan/Feb.

jb

10/12/2005 08:29:00 AM  
Blogger grim said...

Pascack Valley,

Yes, I saw it deleted under Bergen County. They said I was spamming, and maybe I was, but I think they just used that as an excuse to delete my post. I'm tempted to start posting copies of all my stories to that forum on nj.com.

I'm sure there is a big realtor presense on nj.com, I'm sure they make quite a bit of money from their real estate advertising (heck, the google ads on the first page of my site routinely links to NJ.COM real estate).

-grim

10/12/2005 08:32:00 AM  
Blogger grim said...

Another natural gas article, all over the wires the past couple of days. With so many people concerned about oil and gas, seems that the huge spike in natural gas has been off the radar of most people..

Winter Heating Bills

Let's hope this winter isn't particularly cold (with the recent cold snap lately, my guess is that we're headed for a particularly cold winter). Any meteorologists out there with predictions for this winter?

This really hits the pocketbook hard, an almost entirely unexpected expense at the same time as the x-mas spending spree (everyone notice how early x-mas decorations were put up this year? It's not a coincidence that retailers are pushing for early spending this year; they know they've got to compete with some large bills (heating, electric, gasoline, increased costs due to inflation).

grim

10/12/2005 08:48:00 AM  
Anonymous Anonymous said...

For whatever it's worth, there is a note in today's Bergen Record that they are going to start a series this Sunday on Northern NJ Real Estate: bubble or boom?

Might be some interesting reading.

Thanks for the great blog.

10/12/2005 09:19:00 AM  
Blogger pascackvalley said...

grim: talking about the real estate bubble is not in my opinion is not spamming, I can tell you that all activity has basically ceased in my town in northern Bergen county. Realtors are actually callimg us back when we visit open house, and prices declines adn relistings are all the rage. Just saw one yesterday, where they reduced their asking price by 10%.

I follow my amrket closely, and tell you that there are people who purchase early in they year, who if they were selling today, would be anywhere from 50K to 75k in the red or more based on asking price.

This is a huge turn around in a short peiod of time. Imagine buying ahouse 6 or 7 months ago, and now seeing similar house on the market asking 50k to 75k less than what you paid for yours, and remember this is the asking price on these new listings, not the final sales price. Peace.

10/12/2005 09:28:00 AM  
Anonymous Anonymous said...

imagne these wantabee fools seeing houses intheir neighborhood 30% less and condos 50% less.
It surely will be a nightmare for many folks. Many manymany sleepless nights ahead for alot of homeowners as the property taxes hit., the utility bills hit the credit card bills hit the gas bills hit and finally the death blow the readjusted ARMs Interest only loans go up.
No more wiggle room

10/12/2005 10:01:00 AM  
Anonymous Anonymous said...

The housing market is blowing up.

This crash is for you greedy realtors, builders, mtg brokers

HAHAHAHAHAHAHAHAHA

10/12/2005 11:20:00 AM  
Blogger grim said...

More "risky lending" warnings..

Bies warns on risky lending practices

There have been some significant changes in psychology over the past few days. There is now solid acknowledgement that the rise in housing prices is largely do to speculation. Also is the acknowledgement that the potential for significant price drops exist, and that those drops may potentially cause solvency issues for both lenders and homeowners.

""From the point of view of bank supervisors, affordability products do not necessarily pose solvency concerns," she said, adding that most homeowners had "a significant" equity cushion."

I would argue that most speculators (i.e. people that bought in the past 3-4 years), do not have any significant equity cushion, thus do pose a solvency concern. Those who bought 20 years ago and hold no mortgage will obviously, not be affected.

"Bies also said banks were generally well-capitalized, "which means that (home) prices could fall significantly without leading to a significant number of bank failures.""

I interpret her message to mean that should home prices fall significantly, there would still be a number of bank failures do to it, however it wouldn't necessarily be significant. That's really a judgement call, what number of bank failures is significant, what number is A-Ok?

-grim

10/12/2005 12:04:00 PM  
Blogger Grim Ghost said...

I like the Record, but it derives a huge percentage of its ad revenue from real estate.

Also, a lot of the readership, who've seen their house prices go up 50-60% in 4 years dont' want to hear that there may be a bubble.

10/12/2005 12:21:00 PM  
Anonymous Anonymous said...

Mtg tax deduction reduced.

This will kick the housing market in the gut.

That's all folks!
Yuk yuk yuk

10/12/2005 01:40:00 PM  
Blogger RentinginNJ said...

"For whatever it's worth, there is a note in today's Bergen Record that they are going to start a series this Sunday on Northern NJ Real Estate: bubble or boom?

Might be some interesting reading."

I doubt it. I agree with Grim Ghost. I will certainly check it out though, but I am betting on the typical "Experts say no bubble here" fluff piece full of one-sided "expert" opinions from local RE agents on how everything is just fine. Its just the rainy weather this week or parents getting kids ready for school. We will hear about how strong the local economy is, low interest rates, get in now and grab a bargain, yada yada yada.

I hope I am proven wrong.

10/12/2005 01:59:00 PM  
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TIMBERRRRRRRR!!!!!!!

10/13/2005 04:16:00 PM  
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