Watchhttp://www.mbaa.org/NewsandMedia/PressCenter/82977.htm
WASHINGTON, D.C. (December 19, 2012) — Mortgage applications decreased 12.3 percent from one week earlier, according to data from the Mortgage Bankers Association’s (MBA) Weekly Mortgage Applications Survey for the week ending December 14, 2012.
The Market Composite Index, a measure of mortgage loan application volume, decreased 12.3 percent on a seasonally adjusted basis from one week earlier. On an unadjusted basis, the Index decreased 13 percent compared with the previous week. The Refinance Index decreased 14 percent from the previous week to the lowest level since week ending November 2, 2012. The seasonally adjusted Purchase Index decreased 5 percent from one week earlier. The unadjusted Purchase Index decreased 8 percent compared with the previous week and was 9 percent higher than the same week one year ago.
“Despite the Federal Reserve’s announcement last week that it would purchase an additional $45 billion in Treasury securities per month as part of its continuing quantitative easing effort, rates increased in the second half of the week,” said Mike Fratantoni, MBA’s Vice President of Research and Economics. “As a result, refinance applications dropped sharply to the lowest level in over a month.”
The refinance share of mortgage activity decreased to 83 percent of total applications from 84 percent the previous week. The HARP share of refinance applications fell to 25 percent. The adjustable-rate mortgage (ARM) share of activity increased to 3 percent of total applications.
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There is no point in refinancing.
The only people that benefit, are mortgages on big loans at least 500K or greater, and are currently financed at 5% or greater. Which to be honest, most of those folks that would fit that description, have already refinanced.
Everyone else would need more than 20% down just to cover the equity difference from when they bought. So most all in this group would be financing at 3.5% down or smaller. Which ugly hidden fees, and a perpetually rising MIP premiums makes even refinancing a 4.75% loan to 2% a 0 sum game.
Go though all of the hassle to close a refi just to end up paying the same if not more. What would be the point of that?
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CaptainShuddup says
That's what I think too, since rates have been low for quite a while, those who could refinance, already have.
Also, I wonder how many of these applications actually get approved. How many come back month after month and re-apply but don't have the credit scores to be approved or have the equity required?
The other piece of the report is that 83% of applications were for refi's which mean only 17% for purchases. Doesn't seem like there is a lot of purchase activity.
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Laguna Beach, CA
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Call it Crazy says
The Mortgage Purchase Index has crept down to 1994 levels, basically, nearly a 20 year low.
But I'm sure investors will keep demand high. They have lots of cash to keep it going according to e-man.
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Call it Crazy says
There's a lot of money to be made if you're a loan officer or mortgage broker between now and 2015 in my opinion. We absorb about 5M homes/year. Say 1.5M homes are bought with cash. So 3.5M homes are bought with a mortgage.
To put things in context, if 3.5M loans represent 17% of the purchases, that means there's about 20M refinance going on per year. That's a lot of refinancing activity.
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E-man says
How do we find out actually how many refi applications are approved? How many get funded versus how many get denied?
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Goran_K says
Investors will keep demand high as long as the numbers pan out. The suck thing about it is that they lock up all of that housing inventory until prices get out of whack for them to sell it. If not, they hang onto it forever for cashflow as well as an inflation hedge.
If prices keep going up at the rate of inflation, they can keep on refinancing and extracting the equity out tax-free. The positive cashflow I'd being offset by the depreciation. Again, tax-free. Once they drop dead, their kids get a step-up in basis and don't have to pay any taxes or recapture the depreciation that their parents took.
If you only have one property, it's a small deal. If you have 10 properties, it's a medium deal. If you have 100 rental properties in the Bay Area, it's a huge deal. Talking about $300k-$500k of gain, all tax-free due to the step up in basis in our tax code. You're looking at $30M-$50M here. That kind of money can generate a lot of income for your heirs years to come.
Hey, I didn't invent the tax code. I just use it to my advantage.
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Call it Crazy says
I can find out by making a couple of phone calls. You can find out by google it. Regardless, it's about understanding the numbers and figures when reading an article.
If we have one death this year and 3 death next year, it doesn't sound like much, but the media would say the death rate has increased 200% year over year. They are correct, but they know how to report it to grab people's attention. That's all.
Cheers.
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robertoaribas's website
lots of those refis are investors... I buy homes for cash, borrow against the home with a loan from a friend, record the loan, use the cash to buy another home. At six months of ownership, you can refi the home on the original purchase without sourcing the purchase funds. at 12 months, you can get a new appraisal and refi on the new higher value, since home values are climbing and I've reconditioned the home after purchase.
That's how I bought 2 million dollars worth of property with $400,000 to invest. I have one more refi to go, and I'm through.
And before anybody yacks about this, when you buy a home for $80K that rents for $1000 to $1100 a month, it cashflows like mad against any loan...
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E-man says
That's exactly why I hate things being reported in percentages. The percentage numbers a meaningless until applied to actual numbers. But reporting the percentages sure makes the story sound better...
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robertoaribas says
It's called delayed financing. You can buy in cash and finance it the next day. The form is it is a cash purchase but the substance is financing. More than half of cash end up being financed. All my colleagues who bought recently used this. There was no intention to pay cash.
Call it Crazy says
It depends, probably the success rate is higher now. The key is the appaisal. Either Higher apprasals and/or low rates are the ultimate drivers of refi's. You get both and it is record terrortory (which is where we were after QE3.
E-man says
It's not just investors, low rates lock out more properties, period. Middle/Higher end homes will have little inventory as 3.5% fixed rate will lock out prospective seller.
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Chico, CA
The entire system is designed to masters to keep the masses at work for them all the time. Mortgages are just another motivator to that end. Only then can the rich masters skim their living off the workers backs. Little vacation, later retirement, no health insurance, lower pay, etc are the goals of the masters so they can skim ever more and more for themselves.
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Chico, CA
The first line on the above comment is: The entire system is designed by the masters to keep...
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Zakrajshek says
It's actually the exact oppposite of the above. When people have the opportunity to buy, it is greater freedom than when they were servants to their landlord. They can choose to rent or choose to buy. 30 year mortgages were a great invention.
The rest of your post about rich masters, little vacation, etc. has nothing to do with mortgages. It has everything to do with the wealth disparity and poor economy without enough jobs...
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tatupu70 says
We only see our landlord when we want him to fix something or when he is in the hood and stops by for a friendly chat. My banks are not that nice though they stash quite a bit of my money.