Mortgage Trends This Week: March 22

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Americans are a taking a breather from applying for new mortgages, a behavior that economists hadn’t expected after Congress extended the $8,000 new homebuyers tax credit through April 30.

The Mortgage Bankers Association, in its weekly mortgage rate application survey for March 12, reported that new mortgage demand fell by 1.9% from the previous week. Lower mortgage demand is widely seen as a sign that Americans remain in belt-tightening mode, and are reluctant to even refinance their mortgages even though mortgage rates remain at historic lows.

That’s especially a disturbing sign as the real estate industry rolls into its usually robust spring buying season. The fact that consumers are more reluctant to apply for a new mortgage ties into a dour storyline for the mortgage sector. Take Fannie Mae’s (Stock Quote: FNM) Economics and Mortgage Market Analysis for March 2010. In it, Fannie Mae issues a more negative forecast for future U.S. home sales than many industry experts had expected or predicted.

In the report, Fannie Mae still expects the housing market to improve in 2010, but at a slower pace than it had previously indicated. Citing poor January home sales, Fannie Mae sees total U.S. home sales falling from 6.1 million in February to 5.7 million in March.

The agency called the recent decline in new and existing home sales "surprising" and "disappointing," but also cited the current decline in home sales as "temporary." FNMA also cited the consumer response to the new homebuyer tax credit as "anemic." That suggests that most of the Americans who decided to take advantage of the tax credit to buy a new home have done so already.

So, for the short term, expect U.S. home sales to lag, as consumers elect to sit on the sidelines and wait for the economy to finally improve. “Anxiety over job and income prospects continues to weigh on consumer confidence which will likely lead to moderate spending growth in the coming quarters," says Fannie Mae chief economist Doug Duncan. "Strengthening growth in the service sector and more favorable financial conditions overall keep us optimistic that we are moving forward with the recovery, albeit at a lower trajectory than previously forecast."

While demand for new homes is low, so too are mortgage rates. That’s a bit of a surprise, as economists had expected rates to rise as the Federal Reserve ended its $1.25 trillion mortgage securities buy back program at the end of March. With the Fed out of the mortgage securities picture, the thinking went, mortgage rates would rise to attract new buyers. But that increase in mortgage rates hasn’t happened, and that has lent more uncertainty to the mortgage market.

For the week, mortgage rates ended mostly lower, with some upward activity in 15-year fixed loans. Here’s the skinny from the BankingMyWay Weekly Mortgage Rate Tracker:

Description       This Week   Last Week

One-Year ARM       3.836%      4.285%

Three-Year ARM     4.334%     4.219%

Five-Year ARM        4.108%      4.125%

15-Year Mortgage  4.441%     4.421%

30-Year Mortgage  5.062%     5.08%

For a thorough review of mortgage rates in your area (or nationwide) visit BankingMyWay’s Mortgage Rate Search. It’s your best bet for finding the best mortgage rate deal possible.

—For the best rates on loans, bank accounts and credit cards, enter your ZIP code at BankingMyWay.com.

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