Mortgage applications dropped 3.1 percent from one week earlier, according to data from the Mortgage Bankers Association’s (MBA) Weekly Mortgage Applications Survey for the week ending May 30. However, real estate finance professionals are split as to whether this is an affirmation of a weak economy and fraying housing market or the data is not fully representative of a market where a number of segments are still enjoying positive activity.
The MBA’s Market Composite Index fell 3.1 percent on a seasonally adjusted basis from one week earlier; on an unadjusted basis, the index declined 14 percent compared with the previous week. The Purchase Index dipped four percent from one week earlier on a seasonally adjusted basis and 15 percent on an unadjusted basis. The Purchase Index was 17 percent lower than the same week one year ago.
The refinance side of the industry saw a bit of a seesaw ride: The MBA’s Refinance Index decreased three percent from the previous week, yet the refinance share of mortgage activity increased to 53 percent of total applications from 52 percent the previous week.
The refinance share of mortgage activity increased to 53 percent of total applications from 52 percent the previous week. The adjustable-rate mortgage (ARM) share of activity remained unchanged at eight percent of total applications.
The MBA also reported that interest rates for most loan products fell to their lowest levels in close to a year. The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($417,000 or less) slipped to 4.26 percent from 4.31 percent, with points decreasing to 0.13 from 0.15 (including the origination fee) for 80 percent loan-to-value ratio (LTV) loans. The average contract interest rate for 30-year fixed-rate mortgages with jumbo loan balances (greater than $417,000) slightly ticked downward to 4.22 percent from 4.23 percent, with points decreasing to 0.11 from 0.16 (including the origination fee) for 80 percent LTV loans.
The MBA’s data included an adjustment for the Memorial Day holiday on May 26.
For Gina Jacobs, president of Woodbury, Conn.-based Gina Jacobs Real Estate & Property Management, the latest MBA data is evidence of a housing market that is still wobbly due to restraints on borrowers.
“I believe less people are applying for loans because unless their income and credit is exceptional, they are going to get declined–and they know it,” Jacobs said. “So, of course, applications are down because approvals are also down. I make this very clear to clients so they know what they are in for. The application process is grueling and going through that, only to be turned down, is devastating to a potential home buyer.”
Bob Rubin, managing director of The Business Loan Connection LLC, based in Southfield, Mich., believed that the data reflected a wider concern about the state of the economy.
“People are scared,” said Rubin. “They see the headlines and fear that the merry-go-round will stop and people will fall off. Housing prices are rising and are higher than before, and people know all the terrible stories about being underwater–and they don’t want to be underwater.”
Rubin added that many industry professionals are not willing to acknowledge what a rough economic environment will do to their businesses. “So many mortgage bankers out there don’t believe this is happening to them,” he said, adding that some companies many go out of business unless conditions improve quickly.
But not everyone is afraid of going out business. Carl Markman, director of national sales at Iselin, N.J.-based REMN Wholesale, stated that his company’s business has increased 40 percent over the past few months. And while Markman noted that his company’s purchase and refinance business is vibrant, its focus on renovation loan products–including the 203k, HomeStyle and HomePath products–is the fuel that is driving activity further.
“Every single day, we have mortgage brokers and mortgage bankers reaching out across the country to sign up with us,” he said. “The new MBA data is completely opposite of what we’re experiencing.”
Gabe Leibowitz, president of New York City-based Skygroup Realty, stated that not every market is experiencing a drop in activity. “I am not seeing the purchase activity in New York slowing down at all yet,” he said.
Furthermore, Leibowitz theorized that the drop in mortgage applications does not necessarily mean that the housing market is stalling. “Some people have given up a little bit because they are not able to beat out cash buyers in the market,” he observed.
