Seems the fall off after the tax credit ended April 30th has yet to fully run its course:

US Mortgage Applications Soar on Refinance Demand

July 7th (Reuters) —Refinancing drove total U.S. mortgage applications to a nine-month high last week, while demand for loans to purchase homes sunk to a near 13-year low as buyers remained sidelined after the expiration of federal tax credits.

Mortgage rates stuck around record lows, the Mortgage Bankers Association said on Wednesday, giving homeowners another chance to cut monthly payments by refinancing.

Refinancing requests jumped 9.2 percent in the week ended July 2 to the highest level since May 2009, lifting total applications by 6.7 percent, seasonally adjusted, to the highest level since early October 2009.

Demand for mortgages to buy homes slipped 2 percent. It was the eighth weekly drop in the nine weeks since the federal tax credits for homebuyers expired on April 30.

“For the month of June, purchase applications declined almost 15 percent relative to the prior month and were down more than 30 percent compared to April, the last month in which buyers were eligible for the tax credit,” Michael Fratantoni, MBA’s vice president of research and economics, said in a statement.

The average 30-year mortgage rate was little changed in the week ended July 2, climbing 0.01 percentage point to 4.68 percent.

The borrowing rate lingered just above the record low of 4.61 percent set in March 2009, according to the MBA’s records that date back to 1990.

Fifteen-year mortgage rates rose to 4.11 percent last week from the record low 4.06 percent set the prior week.

Refinancings accounted for 78.7 percent of all applications last week, the highest share since April 2009, the industry group said.

Tepid employment growth and a surprisingly steep slump in pending home sales kept interest rates low.

Home purchases will stay weak over the next few months as the housing market adjusts to the end of government incentives, and prices should bottom around the third quarter, said Robert Andrews, senior research analyst at IBISWorld in Santa Monica, California.

Fallout from record defaults and foreclosures are also likely to sway many younger buyers from making such a big commitment in the near term, he said.

“People in my generation, people 20 to 30 years old, saw the downside risk associated with housing, so I think there’s going to be a bit weaker demand over the next few years,” said Andrews.

Refinancing, likewise, is unlikely to approach the levels seen last year when mortgage rates were near current levels.

Borrowers who could qualify for refinancing have in most cases already refinanced, most analysts agree.

34 Responses

  1. “Federal Reserve officials, increasingly concerned over signs the economic recovery is faltering, are considering new steps to bolster growth… One pro-growth strategy would be to strengthen language in Fed policy statements that the central bank’s interest rate target is likely to remain “exceptionally low” for an “extended period.” The policymakers could change that wording to effectively commit to keeping rates near zero for even longer than investors now expect… Another possibility would be to cut the interest rate paid to banks for extra money they keep on reserve at the Fed from 0.25 percent to zero”.

    Warren, you should send the FOMC t-shirts that read The Natural Rate Of Interest Is Zero (that or hire Tiger Woods’s skywriting nemesis to follow Bernanke around) :o)

    1. On a more serious note, the Fed isn’t doing itself any favors politically by subordinating the needs of the economy whenever it conflicts with the interests of banks (and fair is fair, if the Fed is dumb enough to give money away, bank executives would be even dumber not to take it).

      The Fed has taken the Federal Fund Rate as low as it can go, maybe its time to revisit Greenspan’s doubling of the prime rate markup (I won’t go into how bad an idea it is that LIBOR has emerged as an alternative index). As Steve Waldman has pointed out, until 1991 the prime rate varied but averaged less than 1.5 points above FFR. Now, its locked like a metronome at 3 points above FFR (which is currently 0.25%).
      This week Month ago Year ago
      WSJ Prime Rate 3.25 3.25 3.25

      The Fed could fix this and boost lending (if not bank profits) by stealing lock, stock and barrel the lending service programs of the one American state-owned bank, the Bank of North Dakota. BND loan programs are public-private partnerships that pays origination fees to community banks in the state that bring in loans for the BND to fund directly with below-market rates. How low below-market you wonder? Well, to give an example from one program (the BND has a slew of them for farms, housing, small business, infrastructure and favored industrial development, Jimmy Stewart meets Jean Monnet):
      BND will purchase the outstanding balance of the SBA guaranteed portion of any loan. BND’s purchase is conditioned upon the borrower receiving the benefit of the lower interest rate…. Variable rate option – 1.50% below Wall Street Journal Prime, adjusted daily, monthly, or quarterly

      There’s a story up last night about a yacht basin owner on the Florida Gulf Coast who, post-oil spill, is sucking wind at his current SBA rate and didn’t qualify for the “economic injury” deal, compare and contrast the SBA rates to the North Dakota rate.
      Peterson already has a $2 million loan with the SBA that charges 7 percent interest. He tried to transfer that loan to one of the SBA’s economic injury loans that charges 4 percent interest and was denied because his business had not sustained any physical damage. The lower interest rate would have reduced his monthly payments from $32,000 to $18,000

      1. @ BW

        Ou monetary system is by its very nature vulturine and predatory. The FED is just an arm of the corpus. While Warren and MMTers argue that those in favor of deficit cuts don’t understand the basic accounting super-structure of our fiat system, MMTers fail to make a strong enough argument for a complete dismantling of the rapacious system of money and finance that has left billions hungry and suffering. And while good-hearted men like Paul Krugman argue vociferously against austerity—and the attendant neo-Fascist systems that will spring from the heads of such measures—they (he) fails to acknowledge that those newly-created trillions will, in our Ponzi world, be devoured by the financial sector and by the Ponzi masters, and will have little to no long-term beneficial impact upon the billions of ‘us’ who live on the peripheries of power.

      2. This is nonsense.

        Warren’s proposals for financial reform do far more to dismantle vulturine and predatory system than weak tea offered by Krugman. btw. Paul Krugman already has boyfriend (Obama) so he will dissappoint you.

        If you do not understand what point of financial system is, you do not understand what elements of it are important and what are not. therefore, you cannot trim it down to size.

      1. Taylor: “In this lower projection the debt is equal to the 67 percent of GDP currently forecast for 2011, but it then declines in an orderly manner until it reaches 40 percent of GDP, rather than the 947 percent of GDP now projected for 2084.”

        Yeah? And what are the error bands on those projections?


    1. yes, used his firm to get ‘soft currency economics’ drafted.

      worked mostly with a mark mcnary but spent quite a bit of time with laffer.

      he does get it completely. just won’t go public with his knowledge.

      very very odd. i have now idea what’s motivating his behavior

      1. Yes, then he was assigned to cover me (warren typing here) and left shortly after that, like the previous person who covered me. Art hasn’t had anyone cover me since then.

      2. Well, actually if you notice the article, he goes on about how paying unemployment just transfers money from one person to another, which is about as “out of paradigm” as you can get – and then he puts forward as his solution a complete holiday for all federal taxes(!), which could only be thought possible by someone who is “in paradigm”.

        So it seems to me that he, like most Republicans, is really only interested in reducing taxes for rich people (and he really hates any government spending that might serve to make ordinary workers less utterly dependent on their betters) and will use any justification he can for it. The fact that I know that he “gets it” just makes me despise him even more….

      3. My experience with laffer is that he is a republican hack. He will say anything so that it benefits republican talking points. It is a bit disconcerting that he “gets it” and continues to talk like this – it shows someone of very low moral caliber.

      4. Interesting how he blows of Ricardian equivalence, according to which the tax cut would just be saved to pay back.

        I love how he uses twisted logic to conceal soft currency economics and just slips it in after “demolishing” the arguments of the left.

        This man is being completely disingenuous, and I suspect a lot of others on the right are too. Certainly, he had to explain soft currency economics to at least some of them in order to sell his suppy-side position in which “deficits don’t matter.” After all, cutting taxes at that level has to result in deficits.

        The antidote to inflationary pressure is monetary. Continue issuing debt even though it isn’t required to finance government, but rather use it as a monetary operation to drain reserves so that the Fed can control inflation through interest rates (NAIRU) using employment as a tool, thereby keeping a continuous buffer of unemployed to undermine the bargain power of labor in order to control wage costs — which the right sees as the primary cause of price inflation. Then, pressure the Saudis to control oil prices in order to prevent energy costs from rising too much. It’s really a devilish plan, and it’s still the preferred m.o. of supply siders.

      5. Yeah, the apple analogy is really disappointing. I’ve seen strong evidence that Laffer completely understands MMT, but he often writes non-sensical stuff for public consumption. He did it in the WSJ about a year ago too (June 10, 2009 to be precise).

        Of course, I am certainly on the same page as he is with respect to tax cuts versus transfer payments (or spending for that matter). But perhaps that’s because I hate poor people.

  2. A coherent objection to this line of argument might be the following: If the government borrowed the money to spend, it would need to eventually pay the money back. That means higher future taxes…”

    Objection, assumes facts not in evidence. If, in reality, the government does not need to borrow to spend, then Mankiw’s parade of horribles never leaves the parking lot.

    Only Krugman would think to cite Abraham Lincoln in support of the government borrowing to spend. Someone less learned in econometric modeling might have thought to cite LIncoln in support of what Lincoln actually did, the government spending without borrowing.

    Met with little cooperation from the banks, Lincoln immediately induced Congress to authorize the issuing of government notes (called greenbacks) promising to pay “on demand” the amount shown on the face of the note in dollars.

    1. “A coherent objection to this line of argument might be the following: If the government borrowed the money to spend, it would need to eventually pay the money back. That means higher future taxes…”

      Beowulf: “Objection, assumes facts not in evidence.”

      Not only that, the evidence goes the other way. The U. S. has never paid the money back since 1836. We have rolled the debt over for 174 years.

      Ya know, being rational includes being in touch with reality. Freud said that, among others. 😉

  3. @ Zanon,

    You’re a self-righteous jerk.

    OK, now that we’ve cleared that up…

    My point…if you READ my comment…was that MMTers do not go far enough in telling us all how they will change the system so that the cneter is not further enriched, and that Krugman’s ideas are wrong even though he is not an inherently avaricious.


    1. MMTers fail to make dismantling of the system the central message in their commentary. IMO, survival of the nation-state (in lieu of the slow but steady evolution of a neo-feudal warring states era, run by the world’s filthy rich) literally demands that the current global economic system be trashed.

  4. my proposals go a long way in that direction, and at the same time enhances the ‘real economy’ that provisions us.

    1. But Warren…you, IMO, need to focus more upon that very issue—as do MMters in general—when the ‘bully pulpit’ is yours. I recognize that you are a relatively soft-spoken and very respectful man. I believe, however, that your candidacy…and MMT in general…needs men like you and Tom etc. to speak with conviction and authority and some high-drama as you describe how your plans WILL save the middle class and periphery from obliteration at the hands of the usurers and filthy criminal wealthy.

      1. “speak with conviction and authority and some high-drama as you describe how your plans WILL save the middle class and periphery from obliteration at the hands of the usurers and filthy criminal wealthy.”

        Are you cooking meth? “Usurers and filthy criminal wealthy”? First of all, anyone (especially a candidate for federal office) who goes out and publicly accuses others of criminal activity better have the FBI surveillance videos tivoed off CourtTV or they’re going to be sued. Secondly, the American voter, fairly or unfairly, tends to shy away from voting for the candidate who sounds like a crazy person.

        Finally, if there is anyone in the country who knows more about our monetary system than Warren, they must be busy with other things, because they haven’t spoken up. Warren would benefit personally if he devoted his efforts towards gaming the system (which most people with his level of knowledge would have done or, perhaps, are doing), instead he’s working to reform the current system to benefit everyone. So seriously, until the proletariat are ready to break their chains or whatever, save the revolutionary rhetoric for your band’s lyrics.

      2. I don’t want to burst your bubble about Warren, but he has been running a hedge fund for over 25 years and has done quite nicely for himself. Not that there’s anything wrong with that…

      3. How’d you know I had a band??!!

        Look, my primary point is only this: All solutions to our global financial crisis at this point lead to increasing wealth and power for the already wealthy and powerful, whilst bleeding the periphery for every thing it is worth and in the process leaving increasing numbers of people in distress.

        I surely agree with Tom that we’re looking at incremental change, and I know I sound half-baked when my dander is up, so to speak. But when one is daily bombarded with stories such as those recently touting the successes of speculators in jacking up food prices—leading of course to hunger and starvation for millions—it can become a tad difficult to remain reserved and circumspect.


      4. Dan, while I agree in principle that it seems at the surface that MMT proposals are just attempts to “fix” an inherently broken system that needs to be completely overhauled if not replaced, one has to begin incrementally. A lot of discussion has gone down here and at Bill Mitchell’s about what should happen ideally, but that is not practical to set as an initial goal. For example, leading with a job guarantee in the present political environment would lead nowhere, but a payroll tax cut is a definite possibility. It would be popular and politicians of both parties would be hard pressed not to support it.

        To my mind, the first major objective is removing the myths that are preventing informed debate based on operations and evidence. Warren has done a great service in this regard with 7 Deadly Innocent Frauds.

        The work has begun but it has a long way to go before the world moves into a monetary understanding of the potential of fiat currency and the pitfalls of allowing independent central banks and the banking cartel to control it. Instituting a global monetary regime based on this will require overcoming powerful forces allied in opposition, whose goal is to preserve and extend the status quo that enriches them and is the basis of their political control.

        The MMT economists have set forth the basic rationale and backed it up with research. Now we need a cadre to get the word out before the iron grip of the oligarchy gets any tighter. Their goal is to control globalization, and if that grip becomes tight enough, it will very difficult to break. This is the real road to serfdom (debt peonage) and the imminent threat of totalitarianism (corporate statism under the control of finance capital), rather the imagined state “socialism” that has followers of Hayek so concerned. They are fighting the last war and don’t realize that it is over.

      5. You make good sense. Please excuse my frustration at the slow movement of change.

      6. Imagine many decades of work ahead that may one day have a massive breakthrough. That is the likely path of MMT.

        We’re fighting a fully entrenched economics paradigm. Look to someone like Tyler Cowen as the model economist from this – he’s hugely popular, very smart, and has never considered MMT.

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