Wednesday, March 2, 2011

Mortgage Pricing Hits Wall, Loan Demand Declines

Mortgage applications have hit a wall. The market is cold and the bottom may be here...for interest rates. Prices are yet another topic all together if interest rates continue to rise.

From the Mortgage News Daily:

" "A wall has been hit in loan pricing" says MND's Managing Editor Adam Quinones. "Lenders have moved the Best Execution 30-year fixed note rate as low as they possibly can without drastically altering their pipeline hedging strategies. This is a factor of what production mortgage-backed security coupon is most liquid in the secondary mortgage market.

On conventional loans, the 4.50 percent MBS coupon is the hedging vehicle of choice for lock desks. Home loans with note rates between 4.875 and 5.25% are generally used to fill 4.50 percent MBS coupon trades. Until MBS investors demonstrate sustainable demand for 4.00 percent 30-year fixed MBS coupons, lenders will not find it economically efficient to quote 4.75 percent note rates without expensive permanent buydown costs."

New purchase applications are dismal at best:

If you refinanced last Fall, your timing may prove to be impeccable:

2011-2013 will prove to be an historic inflection point in my opinion. For the old school bubble bloggers out there, you probably remember Kieth from Housing Panic 2005-2008. Well, he posted an interesting update late last year and sent one clear message: It's time to start buying.

Personally, I feel Oregon and the NW were late to top, and will be late to bottom. But for the most part, it's clear that there are significant changes afoot with respect to our housing markets, the price of oil, hard assets, and the value of the US dollar. Note this interesting press release.

Central banks are tricky, and we've all heard the phrase "Don't fight the FED". There are times when it pays to have no debt, and hoard US dollars. There are times when it pays to have some debt and hold an equal stock of US dollars. There are also times when it pays to get out of dollars, or even to borrow them now before they are devalued.

Where are we now?