Mortgage Purchase Applications plunged to a 13-year low last week, despite near-record low mortgage rates, according to a report from the Mortgage Bankers Association this morning. The average 30-year fixed mortgage rate fell to 4.83 percent last week.
Total mortgage applications dropped by 1.5 percent last week, with purchase applications declining 27 percent, to the lowest levels since 1997. Refinance applications increased by 14.5 percent and accounted for nearly 70 percent of all applications last week.
The first-time home buyer and repeat tax credits, which expired at the end of April, appear to have accelerated sales into the spring at the expense of the summer months.
Mortgage rates have been held low in part because of the debt crisis in Europe, which is causing investors to flee to the safety of U.S. Treasury bonds. This is causing Treasury yields to decrease, and treasury yields are the basis for most interest rates in this country.
Borrowing costs are extremely low, and so are home prices, but continued high unemployment and a large supply of distressed properties ensure that the recovery will be slow and prolonged compared to past recoveries.
With what we are seeing happen in markets now, what do you think of the federal tax credits? Did they make sense, or were they robbing Peter to pay Paul?
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