After dipping their toe in the mortgage loan purchase pool last week, buyers are waiting for the water to warm up a bit before buying. Earlier in the month, mortgage refinance and purchases were rising as mortgage rates and prices were falling. However last week mortgage loan purchase applications dried up possibly due to the prospect of further price reductions and additional foreclosures becoming available.
The Mortgage Bankers Association reports mortgage loan applications tumbled 0.7% during the week of March 11. The mortgage purchase index dropped 4%, however refinancing rose 0.9%.
Fertile mortgage interest rate ground continues to make refinances attractive. The average 30-year fixed mortgage rate dropped from 4.93% to 4.79%. The 15- year fixed mortgage rate is close to hugging the 3% rate, now at 4.03%.
Mortgage Loan Purchase Applications Remain Tentative--Cash Offers Are Up
Although current homeowners seek mortgage loan refinance in order to lock into historically low rates, new and existing homebuyers seem to have temporarily put the brakes.
According to Scott Anderson, senior economist/Wells Fargo Securities (Minneapolis), “Demand remains very sluggish at this point. We still have a glut of existing homes, and that’s the main problem. Jobs are still a concern.”
However is inventory not moving or has cash taken over the traditional mortgage? The National Association of Realtors reports that 32% of the sales in February were all cash sales. The group says that 90% of the market is comprised of previously owned homes and 37% of that total was distressed properties last month.
The Associated Press is reporting that in some areas, all cash offers have taken over the mortgage loan market. In the Tampa Bay area all cash transactions have doubled and that cash only buyers are typically more interested in distressed or foreclosed properties.
One Tampa Bay area Realtor says that he’s seeing an influx of buying activity, primarily coming from cash buyers.
Sean Snaith an economics professor at University of Central Florida says that there is a reason why cash is currently king and that mortgages are slow. He says that a multitude of cash buyers have emerged because of depressed prices and that mortgage lending has still not normalized.
Optimism in the 2011 Mortgage Market
Although mortgage loan applications continue to bounce up and down, Snaith explains that price will drive the market, "When prices stop falling then we have some balance in supply and demand."
However, Tampa Bay Realtor Steve Fruit says that while he is seeing a slow down in price reductions, he heard that economists are not predicting price stabilization until 2013 in his market.
As prices continue this slow descend and mortgage loan rates stay in the neighborhood of 5% or less, realtors and mortgage brokers on the national front are urging potential buyers to take a leap of faith.
Americans may have gotten desensitized to seeing mortgage rates and prices this low and need to understand that they may never see a market like this in their lifetime.
Realtor Brenda Siegle optimistically says, "What I'm seeing is that if people are renting they can get into a home as cheap – or if not cheaper – than renting. They can own it; they can build up some equity. So I think people are really taking advantage of today's market. It's affordable to them."
She adds, "If there is a good house, priced right, it will sell. If you want it, you better step up to the plate."