Outlook For Housing Continues To Deteriorate
-- July 30, 2003
A leading indicator of the future health of the housing sector -- the Mortgage Bankers Association index of mortgage applications -- took yet another beating. Last week, we told you that the plunge in mortgage applications was just beginning. And the latest survey -- for the week ending July 25 -- shows an even bigger slide. Take a look...
As you can see from this graph, mortgage applications are falling fast. In fact, the index is now 47.6% off its May 30th high. While purchases took a modest hit -- tumbling 3.5% -- applications for refinancing fell an astonishing 32.9%.
The reasons? First, there's rising interest rates. The average rate on a 30-year fixed mortgage rose to 5.87% last week. That's way up from its record low of 4.99% in June.
Then, there's the general dismal outlook consumers have on the economy. Yesterday, for example, a report showed that consumer confidence plunged to 76.6 in July, its lowest level since March.
Clearly, rising mortgage rates have put a big wrench in prospective home buyers' plans -- and an even bigger wrench in home owners' plans to refinance their mortgages for cash. This spells big trouble for both the housing market AND the overall economy.
Refinancing Activity Drops Sharply