by Broderick Perkins
(7/6/2012) - Ever-falling, record-low interest rates continue to tempt consumers to purchase a home or refinance, but with strict underwriting rules, weakened consumer confidence, and economic turmoil in an election year, they just aren't buying it.
Mortgage applications were down 7.1 percent from a week earlier, according to the Mortgage Bankers Association's (MBA) "Weekly Mortgage Applications Survey" for the week ending June. 22, 2012, the latest report.
For the week ending July 6, Freddie Mac reported averages mortgage rates at record lows for both the 30-year fixed interest rate mortgage (FRM) and the 15-year FRM, at 3.62 percent and 2.89 percent respectively.
Nevertheless, MBA found both the refinance index and the purchase index down 8 percent and 1 percent, respectively, from the previous week and the purchase index was down almost 3 percent from a year ago.
"Refinance volume fell last week due largely to a fall-off in refinance applications for government loans, which had more than doubled the prior week," said Michael Fratantoni, MBA's vice president of research and economics.
"The large swings in activity were due to the implementation of FHA's new premiums on streamline refinances, and borrowers timing their applications to lower their premiums," Fratantoni added.
But that's not all.
Consumer confidence is on the rocks
The Conference Board's "Consumer Confidence Index" was down in June for the fourth consecutive month as consumers remained pessimistic about incomes, jobs and the economy.
Those expecting increases in income declined to 14.8 percent in June, from 15.7 percent may, according to the board. Consumers concerned about income, aren't willing to risk a mortgage.
Only 14.1 percent anticipate more jobs in the next six months, down from 15.4 percent. Those no-job-no-income or assets (NINJA) loans are long gone.
Consumers stating jobs are "hard to get" increased to 41.5 percent from 40.9 percent, while only 15.5 percent expect business conditions to improve over the next six months, down from 16.6 percent.
Among those surveyed, 35.1 percent said business conditions are "bad," up from 34.7 in May.
"Consumer Confidence declined in June, the fourth consecutive moderate decline. Consumers were somewhat more positive about current conditions, but slightly more pessimistic about the short-term outlook. If this trend continues, spending may be restrained in the short-term," said Lynn Franco, director of economic indicators at the board.
American Dream unrealized
In another recent study, real estate valuation company Integra Realty Resources (IRR) found that the American Dream of homeownership is alive and well, but dreams don't always translate into reality.
While 75 percent of non-homeowners ages 22 to 50 in 11 major U.S. markets believe owning a home is important, more than 60 percent don't plan on taking the plunge anytime soon.
Their reasons for not buying were lack of a down payment (31 percent); fear of making a bad investment (24 percent) and concern about the economy (21 percent).
That could be good news for the rental sector.
"The down payment conundrum continues to suppress demand with no easy resolution in sight. This segment of the population will be turning to rental housing instead, which will further boost the rebounding multifamily sector," said Benjamin Loughry managing partner at IRR-Dallas/Fort Worth.
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