Source: Calculated Risk
The Refinance Index decreased 14.3 percent from the previous week and the seasonally adjusted Purchase Index decreased 5.7 percent from one week earlier.
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“Purchase and refinance applications dropped this week, even after an adjustment for the Memorial Day holiday. Purchase applications are now 35 percent below their level of four weeks ago, ashomebuyers have not yet returned to the market following the expiration of the homebuyer tax credit at the end of April,” said Michael Fratantoni, MBA’s Vice President of Research and Economics. “Although rates remained essentially flat, refinance applications dropped this past week for the first time in a month. Despite the historically low rates,many homeowners have already refinanced recently, remain underwater on their mortgages, have uncertain job situations, or have damaged credit following this downturn, and therefore may not qualify to refinance.”
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The purchase index has collapsed following the expiration of the tax credit suggesting home sales will fall sharply too. This is the lowest level for the purchase index since February 1997.
Source: Wall Street Journal
“More evidence is out on Wednesday that the pool of homeowners who can refinance under today’s more stringent lending standards has been exhausted: Mortgage rates have hovered close to their lowest levels in decades, and yet refinance demand fell last week from the previous week.
Demand for home-purchase mortgages also continued to fall last week, according to the weekly application survey from the Mortgage Bankers Association. That means there have now been five straight weeks of declining demand for purchase mortgages, which have fallen to their lowest level since February 1997.
“Home buyers have not yet returned to the market following the expiration of the home-buyer tax credit at the end of April,” said Michael Fratantoni, the MBA’s vice president of research and economics.
Early indications show that home sales activity plunged in May, the first month after the tax credit’s expiration. Sales in markets including Minneapolis, Denver, Seattle, Phoenix and New Jersey were down by around 25% in May from one year earlier.
Most analysts expected housing demand to fall after the tax credit expired, but few had predicted that mortgage rates would tumble to such low levels after the Federal Reserve ended its purchases of mortgage-backed securities in March. Average rates on 30-year fixed-rate loans fell to 4.81% last week from 4.83% at the end of May.”
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