Mortgage Crisis Continues
Latest News by Better Trades
In a statement released early Wednesday morning, the
Mortgage Bankers Association (MBA)
confirmed their reports that the demand for mortgage applications throughout
the U.S. slipped 24.5% last week as consumers continue to worry about the
financial and housing markets as a whole.
According to the firm's index, those looking to purchase or refinance their home
loans dropped to a reading of 600.6, for the week ending February 6, down from the
previous week's reading of 795.4.
"Lenders are reluctant to underwrite mortgages to any potential homeowner without
pristine credit," proclaimed Ryan Sweet, an economist at Moody's Economy.com. "New
homebuyers are still few and far between because of the measurable deterioration
in the labor market and reduced access to credit."
The group also released data showing that refinancing of one's mortgage plummeted
more than 30% last week, along with the MBA's purchasing index declining by 9.8%,
its lowest reading since December 2000.
One of the biggest contributing factors to the index's decline this past week was
the steady increase in job losses of the past several months. With more people
losing work, and credit becoming tighter, demand for loans is diminishing, not to
mention the surge in foreclosures and the rapid declines in home prices.
As for the nation's borrowing costs, the average rate on a 30-year fixed mortgage
was reduced from 5.28% to 5.19% during the past week. The 30-year mortgage was at
its lowest ever back in mid-January when the rate stood at 4.89%. Over the past
three months, the average rate for a 30-year loan has slipped by a full percentage
point.
Additionally, the rate on a 15-year fixed mortgage retreated as well last week,
falling from 5.14% to 5.00%. With expectations of the government stepping in and
aiding the ailing housing industry, many buyers are still hesitant to jump in and
make that purchase.
If the government steps in, many think that the 30-year fixed rate could fall as
low as 4.00%, in addition to the proposed home-buying tax credit of $15,000 that
may entice buyers back into the markets.
The National Association of Home Builders cited that the tax credit could create
upwards of 255,000 jobs, along with an estimated 500,000 homes sold if the credit
is adopted into the economic stimulus package that is awaiting approval.
Not only are the single-family mortgages being affected by today's economic crisis,
the MBA also revealed that commercial and multifamily mortgages were devastated in
the 4th quarter of 2008.
Showing massive year-over-year declines, the MBA's data confirmed that property
types across the board showed huge decreases in mortgage loans. From 2007,
commercial and multifamily mortgages fell nearly 60% in 2008.
"Commercial and multifamily mortgage lending slowed to a trickle in the fourth
quarter," announced Jamie Woodwell, vice president of commercial real estate
research at MBA. "Between the worsening economy and the continued credit crunch,
lenders are extremely cautious about lending and borrowers are likely to hold onto
the assets and the loans they already have."
Within the report, the MBA showed that loans in 2008 for hotel properties plummeted
99% from 2007, with retail properties a close second at an 82% decline. Further
into the report, industrial properties fell 76%, along with office properties loans
slipping 72% and multifamily property loans decreasing by 62%.
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