The latest headlines from Freddie Mac and MBA make it clear beyond a doubt that the old assumptions about the housing economy no longer work.
Mortgage rates, fixed and adjustable, hit all-time record lows amid market and employment concerns and economic uncertainty. The previous record lows for fixed mortgage rates, and the 1-year ARM, were set the week of August 18, 2011. The 5-Year ARM matched its all-time low set last week at 2.96 percent.
Meanwhile mortgage applications decreased 4.9 percent from one week earlier, according to data from the Mortgage Bankers Association’s Weekly Mortgage Applications Survey for the week ending September 2, 2011.
MBA’s Market Composite Index, a measure of mortgage loan application volume, decreased 4.9 percent on a seasonally adjusted basis from one week earlier. On an unadjusted basis, the Index decreased 5.3 percent compared with the previous week. The Refinance Index decreased 6.3 percent from the previous week. The seasonally adjusted Purchase Index increased 0.2 percent from one week earlier. The unadjusted Purchase Index decreased 2.1 percent compared with the previous week and was 13.5 percent lower than the same week one year ago.
“Heading into the Labor Day weekend, the 30-year rate was at its second lowest level in the history of our survey (the low point was reached last October), and the 15-year rate marked a new low in our survey,” said Mike Fratantoni, MBA’s Vice President of Research and Economics. “Despite these rates however, refinance application volume fell for the third straight week, and is more than 35 percent below levels at this time last year. Purchase application volume remains relatively flat at extremely low levels, close to lows last seen in 1996.”
For generations, low rates were the magic button policy makers pushed to stimulate the economy, especially home sales and refinancings. Looks like that button is busted.