Wednesday, February 18, 2015

Imagine a world where fannie didnt keep housing afloat!

That world would look like this:

Mortgage interest rates rose to their highest level since the beginning of this year, and mortgage volume reacted in the opposite direction. Loan applications fell 13.2 percent for the week ending February 13, according to the Mortgage Bankers Association.

The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($417,000 or less) increased to 3.93 percent from 3.84 percent, with points increasing to 0.35 from 0.31 (including the origination fee) for 80 percent loan-to-value ratio (LTV) loans, according to the MBA. That increase had the biggest effect on refinance applications, which fell 16 percent week-to-week on a seasonally adjusted basis.
"Refinance volume fell particularly for larger loans, as evidenced by the decline of almost $25,000 in the average loan size for a refinance loan," said Mike Fratantoni, MBA's Chief Economist.
Mortgage applications to purchase a home also reacted negatively, falling 7 percent for the week, although they are just barely higher than a year ago. This, even after the FHA, the government mortgage insurer, lowered premiums on low down payment loans dramatically just three weeks ago. That made loans considerably cheaper for cash-strapped buyers.
It just shows how sensitive today's buyers are to the slightest moves in rates. The 30-year fixed is still below 4 percent, historically very low, but home prices are still rising. Prices are not being driven as much by demand as they are by incredibly tight inventory.
Demand is unlikely to improve this week, not for refinances nor for purchases. Interest rates jumped again Tuesday, reacting quickly to a sell-off in the bond market. Mortgage rates loosely follow the yield on the 10-year Treasury, which moved markedly higher
"In terms of bad months following good months, February is the worst bounce since January 2009," said Matthew Graham of Mortgage News Daily. "What had been 3.625 percent two weeks ago is now 3.875 percent."
The nation's home builders and Realtors had been hoping for a bounce over the President's Day holiday weekend, the unofficial start of the spring housing season, but buyer traffic was weak. Builders blamed frigid temperatures and seemingly endless snowfall across much of the nation, but others pointed to simple fundamentals.
"It's the price point, not the temperature, that is chilling builders," said Nela Richardson, chief economist for Redfin.
Home builders are still focusing on higher-end homes, which will become more vulnerable as rates rise. They are also still building at below-average levels. January housing starts are set to be released by the U.S. Commerce Department at 8:30 am Eastern Time Wednesday.

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