By Mike Colpitts
Growing consumer unrest over the economy, real unemployment reaching levels that have not been seen since the Great Depression and falling home sales has triggered a housing market in the majority of the U.S. that is in a free-fall. Purchase applications for home mortgages fell to the lowest level since 1996, and they are still falling.
The foreclosure crisis, which is narrowing in on nearly a year and a half has taken an estimated 7.2-million homes, according to government officials as bankers refuse to negotiate better terms with mortgage holders in plight over the financial crisis.
The Obama administration’s efforts to quiet the storm in the foreclosure crisis has resulted in little fundamental improvement in most markets, according to housing analysts as home values in most of America decline at levels that haven’t been seen in nearly a half a century.
The Mortgage Bankers Association index, a composite of loan application volume, showed an unadjusted basis drop of 12.6% compared to the previous week. The purchase index was 43% below a year ago average, showing a massive drop in applications for new home mortgages.
The decline in home mortgage applications is a result of the federal government’s efforts to incentivize home purchasers to make home buying decisions as a result of tax incentives offered that expired at the end of April, and the uneasiness of consumers over the foreclosure crisis.
Home sales have not shown evidence of strengthening markets as the Obama administration had hoped with its series of programs to bolster markets. The drop is resulting in a huge pent up inventory of homes for sale across the nation that have little hope of selling in the next year.
Even mortgage rates, at their lowest levels in nearly 40 years don’t seem to be getting home buyers off the fence, who are less than confident about the economy’s future. New home sales declined to their lowest levels in May, according to the Commerce Department, the lowest since they have been keeping records in 47 years.
The crisis presents a massive series of problems for the housing market and the overall economy, which has seen unemployment grow as a result of the troubled economy.
The shaky ground the housing market is on was also elevated by the Mortgage Bankers Refinance Index, which decreased 2.9% from the previous week, the first time in early two months that refinancing had dropped as homeowners lost interest in obtaining refinances on mortgages.