Mortgage applications declined in last week by 3.2%, an 18% decline from the same period last year. According to some reporters, this decline is the direct result of President Trump’s decision to suspend the FHA annual premium rate cut announced by FHA just prior to his inauguration. (Applications) Get real…
Yes, applications are down, and yes, somewhat because of the suspension of the FHA premium cut, but there is more to it than this.
With the recent increase in rates, resulting from an improving economy, refinance applications are on the decline. I guess you can then blame the President for this decline since the Fed’s raised rates because of an improving economy. Maybe, we should have a poor economy so we can keep mortgage rates low. I don’t think so…
Another reason for the decline is due to a shortage of affordable housing resulting from many homeowners having already refinanced their homes at lower rates. These homeowners are not selling now. This leaves fewer homes on the market for sale. Fewer home sales equal fewer mortgage applications.
One of the main reasons for the decline in refinance applications is a 13% drop in FHA loan refinance applications. FHA refinance activity was temporarily spurred by the premium cut.
However, such refinance applications would have done nothing to increase homeownership or help new low to moderate or first-time homebuyers. Though these refi’s would have reduced payments for current FHA borrowers, they would also have reduced the flow of funds into the already shaky FHA insurance fund. Not necessarily a good thing…
So, President Trump hit the brakes a little, to allow some time to analyze the FHA premium cut to determine what’s best for the FHA insurance fund, home buyers and the economy. It seems to me to be a prudent move. Had this been done by the prior administration, I believe it would have been touted as a smart move.
The best way to get housing moving and homeownership rates up is for a strong vibrant economy that creates jobs and allows for income growth. Continually cutting interest rates is not the answer.
The Fed did not raise rates at yesterday’s meeting. So, for now, it looks as though we’ll have six more weeks of low mortgage rates. That should make some happy.
Happy Groundhog’s Day!