As home sales continue to increase, mortgage applications move along with them. This is a logical connection, since most people do not possess sufficient cash to pay for a home in full. It appears that the lower cost of homes and lower current mortgage rates are stimulating this borrowing demand.
Despite economic fears and despite job losses, home sales continue to rise. The National Association of Realtors indicates that pending home sales for July are up12 percent over last year’s figures. Meanwhile, applications for mortgages rose 64.5% last week, compared with numbers from a year ago, according to the Mortgage Banker Association. In addition, the MBA says that refinancing applications were up 22.45%, which is the largest leap since March of this year.
Oddly enough, despite the problems that adjustable mortgage rates have engendered, and despite the poor publicity these loans have generated, almost 6% of last week’s loans were adjustable rate mortagages. It is possible for these ARMs believe that rates will continue to fall and that they will pay less over time for their homes.
Based on the hard lessons the nation has endured, the several mortgage bankers to whom I have spoken recommend heavily against ARMs. They suggest that fixed mortgage rates, which have fallen close to 5%, are a far better way to borrow. These rates are constant, the homeowner always know what to expect.
Record low rates of 4.61% were reached in March of this year, while this year’s peak occurred in June, at 5.57%. For those who are waiting on the sidelines before applying for a mortgage, in hopes of rate drops, it may be time to act. The Federal Reserve may have to put a stop to its purchases of mortgage-backed securities in the not distant future. That is, unless more money is somehow directed into its coffers. If that money dries up, mortgage rates will have to rise.
While no one can prognosticate the exact effect a rise in mortage rates will have on the currently robust housing market, it is safe to suggest that some enthusiasm for home purchases will wane. However, according to the Business Insider, more than six million foreclosures are expected to hit the market within the three years.
While this should maintain a damper on the acceleration of home prices, it keeps the possibility of owning a home with reach of millions of Americans who are eager to purchase an affordable property. And that means, barring another economic catastrophe, that there will be millions of potential buyers in the market, almost all of whom will have to apply for mortgages.
Written by Marc Jablon, Realty Associates
marcjablon@yahoo.com / 561 / 213 – 6139
www.marcjablonhomes.com/
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