Wednesday, December 5, 2007


The mortgage market is regaining its health. The Mortgage Bankers Association (MBA) reported that its Applications Survey for the week ending November 30, 2007 surged 22.5 percent on a seasonally adjusted basis from one week earlier. On an unadjusted basis, the Index increased 51.5 percent compared with the previous week-which was a shortened week due to the Thanksgiving holiday-and was up 24.2 percent compared with the same week one year earlier.

The Refinance Index increased 31.9 percent from the previous week and the seasonally adjusted Purchase Index increased 15.2 percent from the earlier week. On an unadjusted basis, the Purchase Index increased 37.3 percent from the previous week. The seasonally adjusted Conventional Index increased 21.9 percent from the previous week, and the seasonally adjusted Government Index increased 27.8 percent in a week.

Some of the increase was because of the shortened Thanksgiving week, but also because interest rates are plunging. Even short-term rates that control ARM indexes have fallen approximately 20 basis points in the past month, perhaps in anticipation of another Federal Reserve rate cut on December 11, the Fed’s last FOMC meeting this year.

The more stable four week moving average for the seasonally adjusted Market Index is up 4.5 percent, up 3.1 percent for the Purchase Index, while this average is up 6.7 percent for the Refinance Index.

The refinance share of mortgage activity had the biggest jump, increasing to 56.0 percent of total applications from 51.4 percent the previous week. The adjustable-rate mortgage (ARM) share of activity decreased to 11.6 from 14.6 percent of total applications from the previous week, reflecting the rush to refinance ARMs to fixed rate mortgages, as rates have fallen.

The average contract interest rate nationally for 30-year fixed-rate mortgages decreased to 5.82 percent from 6.09 percent, with points unchanged at 1.07 (including the origination fee) for 80 percent loan-to-value (LTV) ratio loans, according to the MBA survey. But it has fallen as low as 5.50 percent in some regions, such as California.

The average contract interest rate for 15-year fixed-rate mortgages decreased to 5.38 percent from 5.69 percent, with points decreasing to 1.12 from 1.13 (including the origination fee) for 80 percent LTV loans.

The average contract interest rate for one-year ARMs increased to 6.28 percent from 6.24 percent, with points increasing to 0.99 from 0.96 (including the origination fee) for 80 percent LTV loans.

Does this signal the beginning of the end of the credit crunch that is bedeviling real estate? It will, if this gives a boost to home sales, which have leveled out of late after falling 25 to 30 percent this year.

Copyright © 2007

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