Rate Decline Spurred Mortgage Activity Last Week

Mortgage activity increased last week despite the threat of a U.S. ratings downgrade, which could have lifted rates across the board. The bond market smartly focused on the likelihood of agreement and the economic damage that had resulted already from a terrified nation frozen in place, neither spending nor investing. Given an onslaught of other negative economic data, including the GDP report released last week, mortgage rates dropped dramatically and inspired real estate stakeholders to take advantage.

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Rate Decline Spurred Mortgage Activity Last Week

The Mortgage Bankers Association (MBA) reported that mortgage activity increased 7.1% in the week ending July 29, 2011. The clear catalyst for activity was a deep drop in mortgage rates, based off a 20 basis point decline in treasury rates. The average contracted rate on 30-year and 15-year fixed rate mortgages fell to 4.45% (from 4.57%) and 3.52% (from 3.67%) through the period. In fact, the 15-year rate marked a record low, and so inspired a slew of activity on both the refinancing and purchasing sides of mortgage deals.

The Refinance Index, which clearly benefits more directly from short-term rate changes, rose 7.8% from the previous week. Refinancing activity gained to 70.1% of the total, from 69.6% the week before, as a result. Still, the Purchase Index, which measures activity on the purchase of a home, also rose by 5.1% on a seasonally adjusted basis from a low base. Housing affordability passed a critical threshold for many, and for others, rates were too attractive to pass on. Still, the absolute level of activity remains below last year’s watermark for refinancing, the result of a plague of negative equity in the market.

In the current economic chaos, you can expect mortgage rates to continue to benefit, and so those who can afford housing now and who are not burdened by underwater mortgages, will continue to find great affordability in terms of pricing and financing. In today’s highly uncertain economic environment, I view primary real estate and stable shelter generally as a critical holding.

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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