Now that the “weather” effect is out of the housing picture, the follow-up question for the market is: Are US homebuyers sidelined waiting for lower prices or surging to beat the tax credit expiration?
For the week ending 03/05/2010, the MBA survey shows that the change in mortgage applications, for both purchases and refinancing, edged up a mere 0.5 percent.
Applications for new purchases applications rose 5.7 percent over the prior week increase of 9 percent. Not a surge by any account, but still, a positive sign. And whether or not potential buyers are sidelined waiting for prices to drop as more houses enter the market might be irrelevant. Assuming there is a larger pool of potential buyers “out there,” buyers must still qualify under stricter credit rules. So even with government support in the form of tax credits, the market appears stalled: sellers are resisting dropping prices further while buyers are looking for lower prices and underwater homeowners lucky enough to buck the foreclosure trend are stuck in a holding pattern.
Note also that refinance applications dropped 1.5 percent from the prior week, suggesting a slowing down in home refi’s. (The average contract rate for 30-year fixed-rate mortgages was 5.01 percent last week, up 6 basis points from 4.95% for the prior week).
Enter a new incentive for short sellers via the Obama administration. Optimists may still hold out hopes for a last-minute buying surge from tax credits, but momentum slowed last week. And whether this latest move by the Obama administration is enough to get market to pick up steam is anyone’s guess, but it looks like a hefty dose of something oily is needed.
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