Mortgage Rates Drop - But No One's Buying
Mortgage rates continue to drop. They're as low as I've ever personally seen them.
Typically, when rates drop, purchases of homes goes up. Or at least you'd see people re-finance their existing mortgages. But neither is happening now.
Home purchases did rise for a while - during the time the government offered a tax credit for buying a house. The tax credit ended April 30th. Home sales plummeted.
As for refinancing, besides the fact that some did refinance already, as rates had dropped to under 5% over the last couple of years, the real issue right now is the fact that banks aren't all that interested in the refinancing business - or so it seems. Maybe it's more accurate to say that, since refinancing requires you to re-qualify for the new, lower mortgage, the underwriting standards are a lot more stringent than they've been in a while.
What's this telling us?
First, it reinforces a point we've been trying to make for months: there's no credible evidence that home prices have bottomed; there's real evidence that home prices will now begin falling again.
Second, it's difficult to get a mortgage these days. And we wonder if that might not a) continue for a long while; b) perhaps get even more difficult. Our reasoning is based on how ridiculously easy it was to get a mortgage in the early part of the decade - until about 2007. It was so ridiculous, that the "correction" in underwriting we're seeing may be just that ridiculous in the opposite direction. We'll wait and see.
Typically, when rates drop, purchases of homes goes up. Or at least you'd see people re-finance their existing mortgages. But neither is happening now.
Home purchases did rise for a while - during the time the government offered a tax credit for buying a house. The tax credit ended April 30th. Home sales plummeted.
As for refinancing, besides the fact that some did refinance already, as rates had dropped to under 5% over the last couple of years, the real issue right now is the fact that banks aren't all that interested in the refinancing business - or so it seems. Maybe it's more accurate to say that, since refinancing requires you to re-qualify for the new, lower mortgage, the underwriting standards are a lot more stringent than they've been in a while.
What's this telling us?
First, it reinforces a point we've been trying to make for months: there's no credible evidence that home prices have bottomed; there's real evidence that home prices will now begin falling again.
Second, it's difficult to get a mortgage these days. And we wonder if that might not a) continue for a long while; b) perhaps get even more difficult. Our reasoning is based on how ridiculously easy it was to get a mortgage in the early part of the decade - until about 2007. It was so ridiculous, that the "correction" in underwriting we're seeing may be just that ridiculous in the opposite direction. We'll wait and see.
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