According to the Mortgage Bankers Association and their weekly survey of applications, mortgage purchase applications are holding steady despite a recent surge in mortgage rates.
The purchase application index rose 1.1% from last week to 270.7 despite the 30-year fixed rate mortgage surging from 5.25% to 5.57%.
Not that anybody should be surprised by this "resilience" as there has been virtually no stimulative impact on demand for mortgage purchase applications or demand for real estate as rates plunged to historic lows.
Here is a comparison between NAR's seasonally adjusted existing home sales and Freddie Mac's 30-year fixed rate mortgage survey over the past several months:
Sep 2008: 5.10 million sales / 6.04%
Oct 2008: 4.94 million sales / 6.20%
Nov 2008: 4.54 million sales / 6.09%
Dec 2008: 4.74 million sales / 5.29%
Jan 2009: 4.49 million sales / 5.05%
Feb 2009: 4.71 million sales / 5.13%
Mar 2009: 4.55 million sales / 5.00%
Apr 2009: 4.68 million sales / 4.81%
While the Fed's efforts to purchase $1.25 trillion worth of mortgage backed securities has resulted in a refinance boom, it has had no impact in terms of a housing stimulus that would allow for the excess housing inventory to be absorbed.
In September of 2008, according to the NAR, when rates were above 6%, there was a 10.1 month supply of housing. The most recent data in April of 2009, when rates plunged to below 5%, shows that there is a 10.2 month supply of housing.
In short, the Fed's "housing policy" has been an incredibly expensive disaster as it has done nothing to stabilize the supply and demand (prices) for real estate.
As I wrote about back in November, "this housing crisis can not be solved by simply allowing homes to become more affordable." Monetary policy is not the solution, fiscal policy is.
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