Economist's Commentary: October 22, 2008

Quick Take on the Economy: October 21, 2008

By Ken Fears, Manager of Regional Economics

The purchase portion of the mortgage applications index fell 10.9 percent, from 313.5 to 279.3, for the week ending October 17th and is 26.6 percent below the figure from a month earlier.
This week marks the second straight decline for the purchase portion of the index. Applications are off their pace from a year ago by 32.8 percent.
Applications for government loans are down 11.9 percent for the week versus 10.5 percent for conventional loans.

The average 30-year fixed rate mortgage has fallen sharply since rising last week. The rate is down roughly 30 basis points from Friday's level of roughly 6.3 percent.

The sharp decline in purchases applications is likely a reflection of the negative economic news and volatile stock market impact on consumers' sentiment. Mortgage rates also peaked above 6.3 percent on the 15th of October, well above the level for the previous 2 weeks.
However, the government eliminated the seller-assisted down payment program for FHA this month. With roughly one third of all FHA lendees utilizing this program, part of the decline likely reflects the loss of this program and a rush to use it in September.
Mortgage rates continue to fluctuate wildly as buyers of debt re-evaluate their new options created when the government began to back the bonds of private banks and companies.

This is one in a series of commentaries by the Research staff of the National Association of REALTORS®. Read more commentaries >

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