Demand for home loans at lowest level this year

[RamboLiberal]

http://www.msnbc.msn.com/id/11961817/

Consumer demand for home mortgage loan applications fell last week to the lowest level this year despite a marked drop in interest rates, as industry trade group said on Wednesday.

The Mortgage Bankers Association said its seasonally adjusted index of mortgage application activity or the week ended March 17 decreased 1.6 percent to 565.0 from the previous week’s 574.4, its lowest level of 2006.

“It is very evident that the steam is coming out of the housing market even though rates moved down,” said Celia Chen, director of housing economics at Moody’s Economy.com, a consulting firm.

<snip>

“A lot of consumers have been having affordability problems, which is why a lot of them have been taking out ARMs,” said Chen. “But with ARM rates rising, fewer people have been able to afford a home, which was also behind last week’s decline in applications.”

[mike_c]

1. in my northern california county only 12 percent of the population...

...can afford a median priced home, and this is a rural, remote county-- not crazy expensive SoCal. Is it any wonder that no matter how low an interest rate is on offer, people simply cannot afford the insane prices real estate is going for these days? I'm a professional with a tenured university position and make well over the average salary in my area, and I cannot afford to buy a house in my community.

[Selatius]

2. My advice: Get your ass out of A.R.M.s

It's stupid not to get a fixed rate mortgage or move into a fixed rate at a time when the Fed is raising interest rates. You'd be saving yourself so much money, which could be used to buy stuff like food.

[TechBear_Seattle]

3. It's the price of homes, not the cost of a mortgage

I could afford a $200,000 home, possibly $250,000 if I really scrimp. In the Seattle area, though, the median price of a single family dwelling is $389,000, almost twice what I can afford. The median price of a condominium is $343,000. There's no way I am going to bother even applying for a mortgage, even at 0% interest.

Adding real injury to insult, the Seattle area has seen a record number of apartments going condo, with 1,551 converted in just 2005. See http://seattlepi.nwsource.com/local/263605_condo20.html

[K8-EEE]

4. "Ownership Society" Means THEY Own US...

And the credit cards are the new company store for people trying to make outrageous house payments on modest little bungalows.

My modest 2 br SF Valley (LA area) house is comped at $575,000. Ridiculous! If we hadn't bought in years ago, we'd never be able to live here. And I was born here! Soon you will have to inherit property or inherit a fortune to buy it, working people are getting so priced out of the "ownership society."

[RUMMYisFROSTED]

12. Zip over to Kitsap.

Yes, you'll have a boat ride but for $160K you'll own 2000+ sq ft. Lots of cool old Craftsmen houses.

[SLCPUNK]

5. I think this is

the beginning of the end. The magic ride for many is over. I have been watching it here in Florida. The market has slowed way down the last few months. Homes are dropping prices by the thousands to get some action. Although I feel that many of the sellers were getting greedy and marking up 20-40k over anything even close to market.

I am very curious to see what happens. Correction is certainly in order in many cities around the country.

[lovuian]

6. Here comes the Bush Depression its going to be worst than

Collidge's and Hoover's...

But we will overcome it...

Its going to be great pain felt and socialism is going to see a resurgence again...

[NYC]

8. When?

I'm not trying to give you a hard time, and I know you don't have a crystal ball, but when? I keep wondering when the feathers will hit the fan. I keep wondering if in some way this can be stalled for so long that it will happen in such tiny increments that people never will see a comparison between now and Hoover's time.

What is your prediction?

[lovuian]

10. Economics 101 When over 80% of a country's assets

are owned by a few then a Depression happens...

America's assets are 90% owned by a few...

that means Bill Gates Warren Buffet George Bush
have more money than 90% of the country...

if you talk to any economist they would tell you that was the cause of the Great Depression...

George and Snow and Bernanke are lying about inflation wages and unemployment... just trying to keep reality at bay...

I don't have a crystal ball but it appears Bush wants a major crisis to happen...to trigger it... within 2 years... the next president will inherit a terrible mess...

Last depression was the stock market panic but I'm thinking this one will be a RealEstate panic...the construction business is HUGE mortgage business huge... Bush has destroyed the Middleclass so its just a matter of time...

[NYC]

11. Why does Bush want the crisis?

So the rich can buy the real estate at bargain prices as the "lesser beings" default?

With or without a major crisis, the next president will inherit a terrible mess. That always guarantees that after a Republican president leaves behind a large debt, a Democratic president will not have money for social programs.

[lovuian]

13. and a HUGE Debt so we can't do a Roosevelt start work

programs to put people back to work...

I think we are going to have to do it to get people to work again...

They want cheap labor... America stands in the way of that...

[NYC]

14. I agree re a work program.

There are so many things that need to be done. There are so many people who need jobs.

Small example: You can't imagine all the potholes, ditches, etc. on some of the city streets. They should be repaired. Where would the harm be in hiring people to do this work? The work would get done; the people would have income.

People with income spend money, thereby keeping other people in business, etc., and the whole thing goes in a circle.

As opposed to going in the downward spiral that is created when people are laid off:

If I am laid off, I don't take clothes to the dry cleaner, the dry cleaner doesn't get his hair cut, so the barber can't afford to go out to dinner, etc.

[Voltaire99]

16. Yes

Agree w/your assessment.

What do you believe it would take for a reinstatement of FDR-style jobs programs? How bad do you think politicians would first allow things to get?

[Voltaire99]

15. Interesting thought

NYC, you could be right: the US could ease into a post-bubble economy over a long enough period that people will get used to living with a dramatically reduced standard of living. To some extent, that's the story of the American working class since the 1970s: less and less over time until one day the good jobs are gone, Wal-Marts are everywhere, and debt servitude is the norm.

My guess is the coming changes will be too large to conceal. We're riding the biggest bubble in history; everyone will feel the ride down. As the 40% of jobs created under Bush for the housing bubble start to evaporate, they'll be excruciatingly hard, and maybe impossible, to replace. If enough go, it's either emergency socialism or the draft to the rescue!

Then there's consumer spending after the bubble without either home sales or equity borrowing to drive it. As The Economist magazine pointed out last year, even a soft landing will hurt terribly. A way of life taken for granted by many will no longer be attainable.

How will Americans make sense of seismic change, I wonder? Polls show they're sick of their politicians and sales that they're tired of newspapers. So narratives sugarcoating collapse will be hard to sell. But the temptations of fascism will also be greater.

FYI: here's a fun tool for trend-watching: http://thehousingbubbleblog.com

As for the medium to long term, I suspect Emmanuel Todd might be correct: http://dominionpaper.ca/features/2003/the_conceited_empire.html

[Iniquitous Bunny]

7. I need an economist to explain to me something.

Why is it that when Republicans are in office, housing prices inflate to these abhorrent levels and when Democrats are leading the country, homes are actually affordable? I'm actually serious here.

[NYC]

9. Home Loan Delinquency Rate Shows Increase.

http://www.democraticunderground.com/discuss/duboard.php?az=view_all&address=102x2173422

Closely related.

...The percentage of Americans who were delinquent on their home loans rose to 4.7% in the fourth quarter, the highest level since mid-2003. Late mortgage payments soared in the hurricane-stricken states of Louisiana and Mississippi. (Chart: Rates in all 50 states.)

And homes in foreclosure reached alarming levels in a handful of Midwest states - Ohio, Indiana and Michigan, for example - that were once the backbone of Industrial America but have seen an exodus of manufacturing jobs.