According to the Mortgage Bankers Association and their weekly survey of mortgage applications, the mortgage purchase application index slipped 3.5% to 261.2 as rates moderated from 5.57% to 5.5% for the week.
The four-week moving average for the purchase index is up 0.7% since rates have surged nearly a full percentage point.
This data gives further support to my argument that mortgages rates below 5% have had or will have little if any impact on stimulating new demand for real estate. In fact, to take it one step further, rates below 6% have had virtually no impact on demand. Unfortunately, it cost the Fed $1.25 trillion to figure this out.
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%
There has been no difference in the demand for real estate when mortgage rates were at 6.04% in September of 2008 compared to when rates plunged to 4.81% in April. The "affordability" horse is dead, let's get off it. Unfortunately, the Fed's recent efforts to make housing more affordable is in fact going to have the adverse effect as it is going to fan inflation and higher interest rates moving forward.
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