A large fear was the $8K, first time buyer; tax credit was akin to the “Cash for Clunkers” program – The creation of a false demand for housing sales at the expense of future sales.
It looks like that may have been the case as Mortgage Apps fell 13.7%, week to week, in advance of the First Time Buyers program coming to an end.
Mortgage applications plunged last week as rates ticked higher above 5%, an industry group said Wednesday, as the expiration of a home buyer tax credit drew nearer.
The Mortgage Bankers Association said its index of mortgage application volume fell 13.7% in the week ended Oct. 16 from the prior week.
The decline in activity came as rates on the widely-used 30-year fixed mortgage increased to 5.07% from 5.02%, according to the MBA. The week’s adjustments included the Columbus Day holiday.
Uncertainty about a possible extension and expansion of an $8,000 tax credit for first-time homebuyers may be hampering the housing recovery. The tax credit now can be claimed by anyone buying a home who has not owned one for three years and who closes the deal by Nov. 30.
The MBA said refinancing applications also fell, by 16.8% from the previous week. The purchase index, a measure of applications at mortgage lenders, declined 16.7% last week.
Note the refi drop as well.
My guess – not based on trending or data, so it’s a pure guess – is that the real estate market will go back to activity levels previous to the FTB tax credit, showing significant weakness, much like the auto industry sales did after the Cash for Clunkers program ended.
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