Last week I wrote a post about how mortgage purchase applications remained alarmingly low despite Congress passing the recent $8,000 first time home buyer tax credit.
The goal of the $8,000 first time home buyer tax credit was to get people off the fence and to stimulate demand for real estate. And in order for first time home buyers to buy a home, they need to apply for a mortgage, and this means a mortgage purchase application.
So, after last weeks dismal mortgage purchase application index I thought to myself, let's give it another week or two and continue to watch the index before we rush to a judgment about the $8,000 tax credit.
Well, here we are a week later and according to the Mortgage Bankers Association, the mortgage purchase application index which now stands at 250.5, has actually decreased -2.6% from last week.
One would have hoped that in response to the new first time home buyer tax credit that Americans would have responded, but they haven't, and quite frankly, I'm not at all surprised. A few weeks ago I wrote a post detailing why this tax credit was going to be ineffective much like it's predecessor, the $7,500 first time home buyer tax credit/loan.
And I know what you're probably thinking now, "Mark, its about jobs, if Americans don't have jobs, they can't buy a home."
And before this it was, "if only mortgage rates were lower".
And before that it was, "if only home values were to come down".
Here is the reality that nobody wants to recognize, by not providing incentives to Americans to invest in real estate, the current pace of home sales is our new reality. And the problem with this, is that once the foreclosure moratoriums fade away, and once the loan modifications go into default as they have been shown to do, there is going to need to be a buyer for the excess inventory, and right now, there's not.
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