Seasonally-adjusted mortgage applications dropped 12.3 percent in the week ending Oct. 23, 2009 from the week prior while refinancing applications dropped 16.2 percent, according to the Mortgage Bankers Association (MBA). These numbers have dropped for several weeks – right alongside mortgage interest rates (30-year fixed mortgages are roughly 5.03 percent). This makes you wonder why the demand for homes is dropping if the interest rates are so attractive.
People Are Afraid
It’s pretty evident that people are feeling leery about spending their money, no matter how low mortgage rates fall. This is mainly because companies are still laying people off and others are imposing a hiring freeze. In other words, if you get laid off, you might stay that way for a while. And with the status of unemployment benefit extensions still being debated by the Senate, not many people feel excited about taking on a new mortgage with unstable means.
The Double-Edged Sword
It seems that Americans are living with our backs against one big double-edged sword. On one end, we have low home prices and a sizable tax credit begging for some attention. On the other hand, we have millions of individuals with no jobs and homes in foreclosure. The bad economy has driven people off of their jobs and out of their homes. As a result, home prices have dropped. But who wants to buy homes in such distressed times? Even more, who feels comfortable profiting from a distressed home with former distressed homeowners?
This may mean that until the economy truly starts to turn around (not just in numbers as Bernanke stated about the recession) people will not feel right about taking on a new mortgage. The only question we need to concern ourselves with, however, is will home prices and mortgage rates increase dramatically as the economy improves?
Are you turned on or turned off by the thought of purchasing a new home?
I wonder it applications are also down because of the perceptions that banks are not lending and that homes are so undervalued by appraisers who seem to have no idea what they are doing.
Why people scared. Look Homes are still $200,000 plus and people are laid off or hours are being cut fuel prices are going up cities and states are cutting services and making people feel even more worried what is next them. I think federal politicians need to have a real close look what each state is doing and get the banking system to stop these high rates and points and other fees they tack on to buying a home. I see real state companies making thousand of dollars buy sell and resell homes you add this up and that can be in thousand of dollars add to your home price. Buy home have only fix rate of 2% for 20 years and get these home prices lower. Most people make $8 to $12 hr these people want to buy not when were they work there employer make them feel like going to loose there job tomorrow.
One answer, check out your local banks, these banks are small and so need to have the service to retain their customers. If GIANT BANK A loses 100 customers it’s just a drop in the bucket and nothing changes. If LOCAL BANK A loses 100 customers it may spell the beginning of the end for them. Check out thestreet.com for bank ratings.