Buying & Selling: Home Prices, Mortgage Apps Both Tumble

This morning we had the news that refinancings were dropping even as new home applications rose:

Refinancing applications dropped for the fourth straight week, declining 4.0 percent to 2,015.0, its lowest level since mortgage rates reached their recent peak in late February. But the MBA's seasonally adjusted purchase index rose 2.7 percent to 413.8 last week. Applications to buy homes have been more choppy week to week than refinancings, though are generally trending higher.

I'm probably grossly oversimplifying here, but it seems to me that the refinancings are slowing because of higher borrowing costs due to interest rates holding steady. The key to the housing boom was encouraging people to refinance using "creative" mortgages and take out home equity loans out the kazoo. Now, people are simply trying to dump their homes as fast as possible, and that means cutting prices--which opens the door to first-time buyers.

And it seems that the NAR agrees with that assessment:

The National Association of Realtors said Wednesday it expects its measure of home prices to fall this year for the first time since the group began tracking sales nearly 40 years ago. In its latest monthly forecast, the group said it expects a 0.7 percent decline in the median price of an existing home sold in 2007. A month ago it had been projecting a 1.2 percent increase. Half of all homes sell for more than the median and half for less.

The CNN article goes into gruesome depth about how all homebuying statistics are expected to dip through 2007 and pick up again in 2008, but I wonder if even that is too generous. We're in a long slide, folks, and the bottom is--while getting closer--not quite there yet.

Posted at April 11, 2007 06:08 PM

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This morning we had the news that refinancings were dropping even as new home applications rose: Refinancing applications dropped for the fourth straight week, declining 4.0 percent to 2,015.0, its lowest level since mortgage rates reached their recent peak in late February. But the MBA's seasonally adjusted purchase index rose 2.7 percent to 413.8 last week. Applications to buy homes have been more choppy week to week than refinancings, though are generally trending higher. I'm probably grossly oversimplifying here, but it seems to me that the refinancings are slowing because of higher borrowing costs due to interest rates holding steady. The key to the housing boom was encouraging people to refinance using "creative" mortgages and take out home equity loans out the kazoo. Now, people are simply trying to dump their homes as fast as possible, and that means cutting prices--which opens the door to first-time buyers. And it seems that the NAR agrees with that assessment: The National Association of Realtors said Wednesday it expects its measure of home prices to fall this year for the first time since the group began tracking sales nearly 40 years ago. In its latest monthly forecast, the group said it expects a 0.7 percent decline in the median price of an existing home sold in 2007. A month ago it had been projecting a 1.2 percent increase. Half of all homes sell for more than the median and half for less. The CNN article goes into gruesome depth about how all homebuying statistics are expected to dip through 2007 and pick up again in 2008, but I wonder if even that is too generous. We're in a long slide, folks, and the bottom is--while getting closer--not quite there yet.