Last Updated May 21, 2010 6:28 PM EDT
Earlier this week, the Mortgage Bankers Association (MBA) announced in its weekly Mortgage Purchase Applications Survey on Wednesday (May 19) that mortgage purchase applications "had plummeted," despite record-low interest rates:
"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. "However, refinance borrowers did react to these lower rates, with refi applications up almost 15 percent, hitting their highest level in nine weeks."(It's interesting to note how much mortgage interest rates fell since Wednesday, when the MBA's weekly survey was released.)
Borrowers who applied for a refinance made up more than 68 percent of the total number of loans, a big jump over the prior week.
The real question is this: What's going to happen to home sales for the rest of this Spring and into the Summer? My prediction is that we've pushed forward a whole lot of sales, so we're going to continue to see a big drop-off, just as more foreclosures will be coming onto the market.
I've spent much of this past week in Atlanta, talking to a number of people who are underwater with their mortgages and are unable to sell:
- One person is spending $16,000 a year to keep paying the mortgage on a property that's worth $70,000 less than she paid.
- Another wants to sell and buy another home, but there is no interest in his neighborhood.
- A third woman says she believes her home value is still dropping and wonders if there is anything she can do.
- Another woman told me that a new builder has come into her subdivision (her builder went bankrupt) and is building homes for $100,000 less than she paid for hers - and they are selling.
- Mortgage Interest Rates Could Hit Rock Bottom Today
- Strategic Defaults Increasing As Homeowners Choose Not To Pay Their Mortgage
- Foreclosure Coming? Perhaps You Should Bulldoze Your House
- Are You In Loan Modification Hell? Join The Club
- Underwater With Your Mortgage? Citi's Deed-In-Lieu of Foreclosure Offers Borrowers 6 Months Free Rent
- Underwater? Maybe You Should Walk Away from Your Mortgage
- Will.i.am Saves Two Families From Foreclosure
Ilyce R. Glink is the author of several books, including 100 Questions Every First-Time Home Buyer Should Ask and Buy, Close, Move In!. She blogs about money and real estate at ThinkGlink.com.