After falling 9.4% last week to a 7-week low, according to the Mortgage Bankers Association, mortgage purchaseapplications moderated and rose 1.3% to 262.1. This was despite the fact that the 30-year fixed rate mortgage jumped from 5.05% to 5.31% for the week ending July 17th.
The 262.1 reading represents continued reluctance of consumers to apply for new credit to purchase real estate despite record housing affordability and an $8,000 first time home buyer tax credit.
In fact, neither the historically low mortgage rates nor the $8,000 first time home buyer tax credit has had any meaningful impact on demand. 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, this data reveals that record low mortgage rates have had no meaningful impact on demand. You can call it the law of diminishing returns, price inelasticity, beating a dead horse, whatever, this is a concept that I have wrote about on more than one occasion.
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: 4.66 million sales / 4.81%
May 2009: 4.77 million sales / 4.86%
The concern of course is that according to RealtyTrac, foreclosure filings have surged 33% from last year but demand for real estate continues to remain weak despite Washington's best efforts to re-inflate their homeownership bubble.