Mortgage Demand Falls to Record Low

Oct 22nd, 2008 @ 8:47 PM by Amber Nelson

The number of U.S. mortgage applications submitted in the latest week reached an eight year low, according to data released Wednesday from the Mortgage Bankers Association.

The MBA’s mortgage application index, fell dramatically by 16.6 percent to a seasonally adjusted 408.1 during the week ended October 17, 2008. That represent the lowest reading since December 2000.

The Association’s home purchase application index, widely considered a timely measure of national home sales, fell 10.9 percent to 279.3, and the demand for refinance home loans plummeted down 23.5 percent to 1,158.8.

Not even falling interest rates during the same period were enough to lure borrowers into the mortgage market. The MBA reported that the average rate on a 30-year fixed rate dropped by 19 basis points to 6.28 percent, excluding points. However, the current rates remain close to yearly highs and almost three-quarters of a percent higher than yearly lows.

Other reasons for the low tide of mortgage applications include home buyers staying on the sidelines, hoping that falling prices will continue to drop. Some potential borrowers may be unable to meet stricter credit lending standards or higher down payment requirements. Some have been negatively effected by the stock market’s recent nosedives. Others still may be unsure about their job security in the turbulence of the present economy and unwilling to take on the hefty burden of a home loan.

MBA chief economist Jay Brinkmann, echoed similar sentiments in San Francisco Tuesday at the Association’s annual convention.

“A recession appears to be under way, as evidenced in rising unemployment, contracting manufacturing activity and declining inflation-adjusted consumption spending,” Brinkmann said. “We expect residential investment to decline further through the first half of 2009, due to the excess of supply of houses and weakened demand from the recession.”

The MBA predicted that a "modest recovery" will commence in the latter half of next year, resulting in "growth to pick up strongly by the end of 2009 and over the course of 2010."

About Amber Nelson
Amber Nelson is a seasoned mortgage industry writer and a regular contributor to Loan.com and Mortgage101.com.

Posted in Mortgage Rates, Mortgage Refinancing, Mortgages
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