The Mortgage Bankers Association released their weekly mortgage application survey on Wednesday which showed that the mortgage purchase application index has dipped to an 8-week low to 251.6. This was despite the fact that the 30-year fixed rate mortgage declined from 4.73% to 4.62% this week.
The mortgage purchase application index has shown continued weakness over the past 13 weeks or approximately 3 months. During this span the purchase application index has averaged only 258. This would indicate that home sales in April, May, and possibly June will reflect weak demand for real estate.
To give this 258 number some perspective, the index hit a 9-year low during the week of February 11th when the index plunged to 235.9.
In other words, despite record housing affordability, economic weakness continues to trump demand for real estate. The result is that home value declines will continue to plague housing for the foreseeable future. The systemic problem is that most economists are projecting that unemployment could exceed 10% through 2010.
The solution is that rather than relying on first time home buyers to drive a housing recovery, Washington needs to include investment real estate as part of a housing and economic recovery plan.