RSSMortgage Applications Jump
Applications for mortgages, especially for refinancing, jumped sharply at the end of November and stayed high in the first week of December. The Mortgage Bankers Association of America reported that its index of applications for new purchases is now at a 22 month high and its index for refinancing applications is the highest in nearly four years.
Applications are always difficult to measure but especially difficult now with chaotic conditions in the mortgage industry. Still, the surge in the last two weeks is a welcome item of good news.
These indexes have recently had an upward bias because more applications are required to get one accepted with tighter credit standards. Also, the indexes come from reports from association members. The class of borrowers that previously applied to the brokers specializing in high risk mortgages has now been redirected to the more established brokerages most likely to be association members. But there is no reason to believe that either of these application trends suddenly strengthened in the last two weeks.
For purchase mortgages, it is a tentative signal that either homebuyers are regaining confidence that the bottom of the price cycle is near or that they can make a sufficiently reliable estimate of the sales price and timing of their current home. The pickup in applications is unambiguously good news but how long the pickup will persist is still unknown. More applications may be a response to the drop in 30-Year rates to under 6% from 6.25% in November and nearly 6.4% in October.
For refinancing, it could be a signal of better confidence to undertake major remodeling projects. But it could also be a signal that high energy costs, high house payments or slimmer workweeks and dropping profit margins have forced households to get extra cash for monthly bills.
