Another Sign Of Major Housing Slump–Weekly Applications Fall Again

The end of federal tax credits for home buyers which were as high as $8,000 ended in April. That almost certainly took some of the wind out of any improvement that economists hoped to see in the housing sector. Then, unemployment showed almost no change as most of the jobs improvement in May was due to temporary hiring by the Census.

It was hoped that historically low mortgage rates, brought down by Fed purchases of housing loan securities would lure buyers back into the market. But, according to the Mortgage Bankers Association, negative trends in the economy have overwhelmed home loan incentives.

The MBA reported that home loan applications fell for the fifth straight week which would roughly coincide with the end of federal tax credits. The organization reported:

The Market Composite Index, a measure of mortgage loan application volume, decreased 12.2 percent on a seasonally adjusted basis from one week earlier. This week’s results include an adjustment to account for the Memorial Day holiday.  On an unadjusted basis, the Index decreased 21.1 percent compared with the previous week.

Another reason for the drop may be that buyers are concerned that housing prices will continue to drop and that new buyers will see the value of their homes fall immediately. RealtyTrac data shows that foreclosures could hit three million this year, which would drag housing prices further into the red.

The MBA’s management said:

“Despite the historically low rates, many homeowners have already refinanced recently, remain underwater on their mortgages, have uncertain job situations, or have damaged credit following this downturn, and therefore may not qualify to refinance.”

The “housing recovery” as it is, may have to wait until later this year or sometime next

Douglas A. McIntyre

Sponsor: 5 best investments for 2010 – The next nine months represent a bold new era for investors.