The $8,000 tax credit for first time home buyers has ended. That created a vacuum. Home loans fell off 5.7% in the week ending June 4, the lowest level since 1997. Purchase applications dropped 35% below their level four weeks ago. Let's keep in mind that applications are a good predictor of future sales.
The refinance market is also suffering. The MBA refinance index fell 14.3%, after rising for four straight weeks. This is taking place even when mortgage rates are below 5%. 30 year loans are down to 4.81%.
Analysts cite several reasons for the drop, among them: many homeowners have already refinanced; others are underwater on their mortgages and still others are unsure about their job situations, making it harder to get approval.
Nevertheless, refinancing accounted for 72.2% of all applications last week.
Several analysts had predicted this would happen. Again, with unemployment at such high levels and many people uncertain about their jobs, a big step like home purchase is being postponed.
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