Loan Modification

Mortgage Requests Continue To Drop Despite Mortage Relief

By Andrew

Mortgage Requests Continue To Drop Despite Mortage Relief

 
The efforts of Governments worldwide to rescue the credit and Housing industry from the pit they have dug for themselves are truly amazing. Banks have been bailed out, loans are  guaranteed, interest rates are kept low, mortgage refinancing relief programs are set up. However despite the best efforts the market is yet to find a bottom it can bounce back from. One of the indicators that give no reason for immediate relief to the crisis is the fall in mortgage requests since Feb.

This drop is, as we mentioned, despite the great efforts from the Obama administration to turn around the housing market. This article will have a look at some of the indexes that provide us with snapshots of the housing market economy and try to decipher what they tells us about how things will be in the short and middle term.

The MortgageBankers Association Index
One of the indexes that housing market analysts keep a close eye on is the Mortgage Bankers Association index of applications, this index dropped a further 19 percent down to 444.8 by June 26, a drop of more than a hundred points from the previous week. The refinancing gauge of the Mortgage Bankers Association fared even worse with a 30% drop to the lowest level in 7 months.

Unemployment levels
Unemployment has hit a record high that has not been experienced since 1983. Unemployment and the fear of unemployment has further slowed down the effects of revival packages from the government as buyers are scared to commit to further spending when they feel their source of income is in danger. This is accentuated by the fact that prices don?t seem to have stop dropping making it a rather difficult market for buyers to assess if they are getting a good deal or not on the property they want to purchase.

Mortgage rates
One of the measures governments, United States included, have carried out to massage the housing and credit industries back into action is to keep interest rates low as an incentive for buyers and investors to borrow cash. This had substantial results, especially in countries like Australia where the crises did not hit quite so hard causing an actual shortage in cash to lend, causing banks to search for money to feed demand. In the United States low interest rates has encouraged and allowed some to refinance their how to either save it or reap substantial savings when refinancing at a lower interest rate.

The drop in interest rates reached record lows of 4.25% for 30 year fixed interest loans creating a window of opportunity for large savings. However interest rates are now rising which seems like a rather bad move when the market seems to not have reached rock bottom yet.
An interesting index that also puts a somber shadow on the current housing market is the percentage of people who are planning to buy a house in the short term. A recent poll indicated that only 2.7% (a slight drop from 2.8%) are planning to buy a house soon.

Foreclosures
All of this occurs with a very large and sharp Damocles hanging over our heads, foreclosures. Some analysts predict 7 million foreclosures this year and next, 4.5 million of them as distress foreclosures. If the government can?t turn around the current trend these foreclosures would drag the prices of homes further which by itself would be enough to nullify any measures the government tries to carry out.

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Full post as published by Blown Mortgage on July 10, 2009 (boomark / email).