Mortgage Activity Normalizes and Offers Clearer Insight

Over the past several weeks, mortgage activity has been skewed by an FHA premium increase. Prospective buyers rushed to beat the costly change, driving a burst in government sponsored mortgage activity. A counter-reaction followed, as Purchase activity dropped off in the week after the deadline. Thus, this week’s data offers us clearer insight into the important spring selling season, though we suspect the data is still tainted a bit by the FHA deadline.

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Mortgage Activity Normalizes and Offers Clearer Insight

Over the past several weeks, mortgage activity has been skewed by an FHA premium increase. Prospective buyers rushed to beat the costly change, driving a burst in government sponsored mortgage activity. A counter-reaction followed, as Purchase activity dropped off in the week after the deadline. Thus, this week’s data offers us clearer insight into the important spring selling season, though we suspect the data is still tainted a bit by the FHA deadline.

The Mortgage Bankers Association (MBA) reported on Mortgage Activity for the week ending April 29, 2011. The MBA noted its Market Composite Index gained 4.0% through the period, driven mostly by refinancing activity.

The MBA’s Refinance Index gained 6% on the week, aided some by lower mortgage rates. Contracted rates on 30-year fixed rate mortgages fell to 4.76%, from 4.8% in the prior week, while rates on 15-year contracts fell to 3.96%, from 4.03%. Refinancing activity increased to 62.7% of overall mortgage activity, up from 61.6% the week before. Certainly, the refinancing share benefited from exaggerated low levels of current purchase activity.

On a year-to-year basis, Purchase Activity is down 36.9%, which is certainly partly due to that latest counter-reaction to the rush to meet the FHA deadline. However, much of this contrast is due to last year’s unnaturally lifted housing market, as prospective first time buyers locked in the special tax break offered by the government. Also, Easter likely contributed, even though we’re measuring the week after the holiday. I know I did not kick up my gears until this week, and I suppose the malaise in stock trading on Bright Monday shows many others followed that slow post holiday recovery trend. There’s nowhere else to go then but up for Purchase Activity now, and this last week’s data shows perhaps the start of that. Purchase Activity increased 0.3% on a seasonally adjusted basis and 1.1% on an unadjusted basis.

Real estate growth and all other economic activity are unfortunately facing a relatively new and rough headwind. Gasoline prices are clearly affecting consumer spending, and so a vulnerable economy that was anticipated by us and others to produce the start of housing growth (off rock bottom lows mind you), is now threatening to stall in its tracks.



Editor's Note: Article should interest investors in Bank of America (NYSE: BAC), Freddie Mac (OTC: FMCC.OB), Fannie Mae (OTC: FNMA.OB), Goldman Sachs (NYSE: GS), Morgan Stanley (NYSE: MS), Wells Fargo (NYSE: WFC), Toronto Dominion (NYSE: TD), BB&T (NYSE: BBT), CIT (NYSE: CIT), Bank United (NYSE: BKU), First Citizens (OTC: FCNCA.PK), Synovus (NYSE: SNV), United Bankshares (Nasdaq: UBSI), Hampton Roads Bankshares (Nasdaq: HMPR), WesBanco (Nasdaq: WSBC), City Holding (Nasdaq: CHCO), Sandy Spring (Nasdaq: SASR), First Citizens (OTC: FCBN.OB), SCBT Financial (Nasdaq: SCBT), Wilmington Trust (NYSE: WL), WSFS Financial (Nasdaq: WSFS), Southside Bancshares (Nasdaq: SBSI), Stellar One (Nasdaq: STEL), Union First Market (Nasdaq: UBSH), Eagle Bancorp (Nasdaq: EGBN), First Bancorp (Nasdaq: FBNC), Ameris (Nasdaq: ABCB), The Bancorp (Nasdaq: TBBK), First Community (Nasdaq: FCBC), Capital City (Nasdaq: CCBG), Financial Institutions (Nasdaq: FISI), National Bankshares (Nasdaq: NKSH), Citizens & Northern (Nasdaq: CZNC), Charter Financial (Nasdaq: CHFN), Seacoast Banking (Nasdaq: SBCF), TIB Financial (Nasdaq: TIBB), American National (Nasdaq: AMNB), United Community (Nasdaq: UCBI), Middleburg Financial (Nasdaq: MBRG), Heritage Financial (Nasdaq: HBOS), Zions Bancorp (Nasdaq: ZION), East West Bancorp (Nasdaq: EWBC), City National (NYSE: CYN), Bank of Hawaii (NYSE: BOH), SVB Financial (Nasdaq: SIVB), Westamerica (Nasdaq: WABC), Cathay General (Nasdaq: CATY), Umpqua (Nasdaq: UMPQ), Glacier Bancorp (Nasdaq: GBCI), Pacific Capital (Nasdaq: PCBC), PacWest (Nasdaq: PACW), Western Alliance (NYSE: WAL), First National Alaska (OTC: FBAK.OB), First Interstate Bancsystem (Nasdaq: FIBK), Nara (Nasdaq: NARA), West Coast (Nasdaq: WCBO), TriCo (Nasdaq: TCBK), Territorial (Nasdaq: TBNK), Washington Banking (Nasdaq: WCBO), Bank of Marin (Nasdaq: BMRC), Hanmi (Nasdaq: HAFC), PNC Bank (NYSE: PNC), J.P. Morgan Chase (NYSE: JPM), United Bankshares (Nasdaq: UBSI), Bank of New York Mellon (NYSE: BK), MB Financial (Nasdaq: MBFI), Astoria Financial (NYSE: AF), New York Community (NYSE: NYB), Hudson City (Nasdaq: HCBK), People’s United (Nasdaq: PBCT), First Niagra (Nasdaq: FNFG), Capitol Federal (Nasdaq: CFFN), Washington Federal (Nasdaq: WFSL), Investor’s Bancorp (Nasdaq: ISBC), Northwest Bankshares (Nasdaq: NWBI), Sterling Financial (Nasdaq: STSA), Ocwen (NYSE: OCN), Flagstar (NYSE: FBC), Provident (NYSE: PFS), Colombia Banking (Nasdaq: COLB), Kearny (Nasdaq: KRNY), Brookline (Nasdaq: BRKL), Dime Community (Nasdaq: DCOM), Flushing Financial (Nasdaq: FFIC), Danvers (Nasdaq: DNBK).

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