October 31, 2010

Mortgage Bankers Weekly Update: Mortgage Applications Increase

Mortgage Bankers Association for the week of  10/27/2010

Market Composite Index:(loan application volume)    increased 3.2 percent on a seasonally adjusted basis from one week earlier.  On an unadjusted basis, the Index increased 3.1 percent compared with the previous week.
Refinance Index: increased 3.0 percent from the previous week.  The seasonally adjusted Purchase Index increased 3.9 percent from one week earlier. The unadjusted Purchase Index increased 3.5 percent compared with the previous week and was 30.3 percent lower than the same week one year ago. 

Purchase Index: The four week moving average is down 0.7 percent for the seasonally adjusted Purchase Index

Refinance Share of Mortgage Activity: decreased to 82.3 percent of total applications from 82.4 percent the previous week. The adjustable-rate mortgage (ARM) share of activity decreased to 5.3 percent from 5.8 percent of total applications the previous week. 
Arm Share: decreased to 5.3 percent from 5.8 percent of total applications the previous week. 

MBA outlook: (Excerpted from mbaa.org) 

We maintain our view that the most likely scenario is a continued pattern of tepid growth and no improvements in the unemployment rate until the second half of 2011, with a similarly slow recovery in the housing market.  We also recognize that the odds of a worse outcome, including a return to recession, are still relatively high, and this has kept rates lower than we had projected earlier in the year.  Many financial market participants are keenly attuned to any communication from Federal Reserve policymakers regarding a potential renewal of large-scale asset purchases.  The decision to reinvest funds from prepayments in the mortgage portfolio into longer term Treasury securities is best viewed as preventing an inadvertent tightening of policy, rather than a move to outright monetary stimulus. 
We predict that mortgage originations will decrease to $1.4 trillion in 2010 from an estimated $2.1 trillion in 2009. Purchase activity continues to be weak, although it was given a brief boost in the spring by the tax credit program, while refinance activity is being propped up by mortgage rates that remain close to historical lows, although there is less refinancing going on now than in previous periods of comparably low mortgage rates. Purchase originations will fall to $539 billion from $740 billion in 2009 and refinance originations will decrease to about $910 billion in 2010 from $1.4 trillion in 2009. This months originations estimates for 2010 forward were revised downwards to reflect the weaker July data for home sales and housing starts.   
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Freddie Mac Weekly Mortgage Update: Long-Term Mortgage Rates Rise Slightly

30-year fixed-rate mortgage:Averaged 4.21 percent with an average 0.8 point for the week ending October 21, 2010, up from last week when it averaged 4.19 percent. Last year at this time, the 30-year FRM averaged 5.00 percent.

The 15-year fixed-rate mortgage: Averaged 3.64 percent with an average 0.7 point up from last week when it averaged 3.62 percent. A year ago at this time, the 15-year FRM averaged 4.43 percent.

Five-year indexed hybrid adjustable-rate mortgages ARMs: Averaged 3.45 percent this week, with an average 0.6 point down from last week when it averaged 3.47 percent. A year ago, the 5-year ARM averaged 4.40 percent. The 5-year ARM has not been lower since Freddie Mac started tracking it in January 2005.

One-year Treasury-indexed ARMs: Aeraged 3.30 percent this week with an average 0.7 point, down from last week when it averaged 3.43 percent. At this time last year, the 1-year ARM averaged 4.54 percent. The 1-year ARM has not been lower since Freddie Mac started tracking it in January 1984.

Freddie Sayz

Attributed to Frank Nothaft, vice president and chief economist, Freddie Mac.
  • Mixed inflation signals kept fixed mortgage rates at bay this week. The headline producer price index jumped 0.4 percent between August and September, which was quadruple the market consensus, while the consumer price index fell below the market forecast. Rates on the traditional 1 year and 5 year hybrid ARMs eased to all time record lows.
  • Meanwhile, the housing construction market is showing some signs of promise. New construction on one family homes rose 4.4 percent in September to the strongest pace since May. In addition, homebuilder confidence rose in October to the strongest level since June, according to the NAHB/Wells Fargo Housing Market Index .
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