The MBA's latest reporting of weekly mortgage activity offered up a sweet little surprise Wednesday. While the Market Composite Index fell 2.0% on a seasonally adjusted basis for the period ending April 1, there was an early Easter treat buried further within the real estate news basket.
The composite index was impacted by a sharp drop-off in refinancing activity. The Refinance Index decreased 6.2% in fact, to its lowest level since February 25, 2011. Mortgage rates were relatively unchanged, with contracted rates on 30-year and 15-year fixed rate mortgages at 4.93% (from 4.92%) and 4.14% (from 4.16%), respectively. The MBA attributed the rate-unrelated drop-off to the simple dwindling of eligible borrowers standing to benefit from refinancing at this point in the cycle. That's a valid argument indeed, but I think there was something more basic behind the lower level of refinancing this time around.
I think mortgage bankers were just too busy filing purchase contracts. The Purchase Index, which measures mortgage applications on the purchase of property, improved by an outstanding rate of 6.7%, to its highest point of the year.
The MBA indicated within its report that the sharp rise in purchase activity was driven by a burst of business in the Government Purchase Index (+10.3%), likely spurred by a rush to contract before a scheduled increase in FHA insurance premiums. That would seem to be the case, I am sorry to say to real estate investors. Purchase activity, in fact, remains at a low mark. It's 16.8% below where it stood during the same week of 2010, on an unadjusted basis.
Hope springs eternal though, and spring is the hope for housing. But with gasoline prices rising 20% since January, consumers are feeling a squeeze that threatens every aspect of the economy.