Smart Borrower Blog

Mortgage Demand Up in Latest Week But Home Sales Unlikely to Increase in Coming Months

Sep 10th, 2008 @ 7:08 PM by Amber Nelson

While the Mortgage Bankers Association reported that the number of mortgage applications increased this week, the National Association of Realtors is forecasting that total home sales will remain at a virtual standstill for the next several months.

The MBA’s data revealed that mortgage demand rose by a seasonally adjusted 9.5 percent from the week before, with refinance loan applications jumping up by 15.4 percent and home purchase loan applications increasing by 6.4 percent.

Of all the applications filed in the latest week, 36.3 percent were refinance mortgage requests, compared with 34.0 percent one week earlier.

Yet even as the MBA cited evidence of rising home sales, the NAR released its Pending Home Sale Index report,  showing a recent decline and a prediction of  little or no change in sales in the coming months.

The Index, a measurement of likely future home sales, fell by 3.2 percent to 86.5 in July from a month before.

 “Pending home sales are oscillating month-to-month, with the long-term trend essentially flat,” said NAR chief economist Lawrence Yun. “Overly stringent lending criteria imposed by Fannie Mae and Freddie Mac in the past month no doubt held back contract signings.”

Some regions, however, have seen positive movement, Yun explained.

“Contract signings have been steaming ahead, nearly doubling in activity from a year before in several California and Florida markets,” he said. “The outer Washington, D.C., exurbs also are coming around very strongly. The Northeast region retreated following a robust gain in the previous month, and soft activity was observed in the broad midsection of America despite very affordable conditions.”

Still, dramatically tightened mortgage loan requirements remain one of the largest barriers to home buying today, according to the NAR.

“The economy is producing more, yet cutting jobs. A first-time home buyer tax credit and lower interest rates on newly conforming jumbo loans favors consumers, yet buyer confidence remains low,” Yun commented. “Even with the Treasury Department’s direct intervention in the secondary mortgage market, it is unclear if we will go back to sound normal underwriting criteria, or if it will remain overly stringent. The housing market outlook is very cloudy.”

About Amber Nelson
Amber Nelson is a seasoned mortgage industry writer and a regular contributor to and

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