Mortgage applications sink to 13 year low…even with the lowest rates in history!

The Mortgage Bankers Association reported that demand for loans to purchase U.S. homes sunk to a 13-year low last week, and refinancing demand also slid despite near record-low mortgage rates. Requests for loans to buy homes dropped 3.1 percent in the week ended July 9, after adjusting for the Independence Day holiday, to the lowest level since December 1996, the Mortgage Bankers Assn. said....Rock-bottom borrowing costs are helping borrowers with pristine credit to buy and those who still have equity in their homes to refinance.

Take a look at this statistic and chart below: The refinance share of mortgage activity remained constant at 78.7 percent of total applications…so, at a 13 year low number, only 21% of the mortgage applications were for new purchases! On an unadjusted basis, the volume of purchase applications is 43% lower than the same week last year!



If even at sub-5% rates buyers are not interested, what’s going to happen to buying interest if (when) rates go up?

• Unemployed people do not buy homes.
• People who have had their hours or salary reduced 20-30% do not buy homes.
• People with a credit score of 599 or less (25% of the population) do not qualify to buy a home.
• People who lost 30% of their home equity can not sell their existing home to buy a new one.

Where I see the most activity (and a lot of multiple offer situations) is in the sub $150k range…where you can buy and have payments less than a comparable rental. Maybe this is what will happen going forward in all price ranges…activity and competition will greatly increase when the home price/mortgage rate equation delivers monthly payments at or close to what it would cost to rent a comparable home. And, it does not, necessarily have to come from lower prices or lower interest rates….if rental rates increase, that will be the ‘flip side’ of the equation. Rising rental rates, in my humble opinion, are quite possible given the scary statistic of sub 599 credit score Americans. Going forward I can see many, many more people throwing in the “credit score towel”…we will have a decade of renters (and this could raise rental rates)…income reduction, job loss, foreclosures, bankruptcy…some times up to ten years to clear/restore your credit without taking affirmative credit restoration steps.

If you’d like to discuss how this all affects your plans to sell or buy, please give me a call on my direct line at 561-602-1258.

Thanks for reading,
Steve Jackson

Recap of market activity...

In this post, I will recap all of the current and recent market activity here in Winston Trails.

Currently On The Market:

• There are 22 homes on the market
• They range in price from $176,000 to $525,000
• 7 of the 22 are being marketed as Short Sales...although my review of public records indicated that aprox. 8 more would be "under water" and be short sale candidates if they were priced in line with recent sales.
• There are NO bank-owned homes on the market

Currently Under Contract:

• There are 18 homes "under contract"
• The 18 range in asking price from $175,000 to $370,000
• 12 of the 18 are Short Sales
• 1 is a bank-owned property
• In at least 2 of the remaining 5 sales it appears that the seller will be bringing money to the closing table (however that is not considered a short sale)

Sold within the last 60 days:

• There have been 11 sales recorded within the last 60 days
• Selling prices ranged from $135,000 to $315,00
• 5 of the 11 were short sales
• 1 of the 11 was a bank-owned property

1) London - $135,000

2) Cairo - $160,000

3) Oslo - $182,500

4) Doral - $249,900

5) Antilles - $253,000

6) Sydney - $255,000

7) Nairobi - $267,500

8) Nairobi - $270,000

9) Capri - $290,000

10) Paris - $292,000

11) Venice - $315,000

Foreclosure Actions:

Currently, there are 97 Winston Trails homes where a lienholder has filed what is generally known as a lis-pendens or notice of foreclosure action. Only a handful of the 97 are being marketed as short sales. I assume the rest are either hoping to catch up on back payments, negotiating forebearance agreements, short-re-fi's, deeds-in-lieu or are just hoping it will all go away.

If even only 30 of the 97 end up going back to the bank at some point in the future...30 bank foreclosures on the maket in our subdivision will serve to greatly exascerbate the difficult situation many current owners find themselves in.