Reader AJ sent along this link:
2009-11-12 12:00:00.8 GMT
By Bob Willis
Nov. 12 (Bloomberg) — Mortgage applications to purchase homes in the U.S. plunged last week to the lowest level in almost nine years as Americans waited for the outcome of deliberations to extend a government tax credit.
The Mortgage Bankers Association’s index of applications to buy a house dropped 12 percent in the week ended Nov. 6 to 220.9, the lowest level since Dec. 2000. The group’s refinancing gauge rose 11 percent as interest rates decreased, pushing the overall index up 3.2 percent.
The drop in buying plans points to the risk that the recent stabilization in housing will unravel without government help.
In a bid to sustain the recovery, Congress passed and the administration signed a bill last week to extend jobless benefits and incentives for first-time homebuyers, adding a provision that also made funds available to current owners.
“Uncertainty over the housing tax credit sent some tremors through the market in recent weeks,” Michael Larson, a housing analyst at Weiss Research in Jupiter, Florida, said before the report. “But now that Congress has extended and expanded the credit, we should see demand pick back up.”
AJ writes, and I agree, that we’re watching a market being artificially propped up with taxpayer subsidies. Greenwich isn’t affected by a piddling $8,000 buyer’s credit (so why do the two print columnists in town spend so much ink on them?) but the national figures reflect a Potemkin village, not a real marketplace. If people aren’t applying for mortgages, they aren’t planning to buy a house, all rosy predictions by builders and real estate brokers to the contrary.
We’re closing in on 300 active foreclosures here in town, and I know of many, many financial types, not yet in foreclosure, who are sucking wind, trying to keep up the appearance of solvency so they aren’t wiped out by their peers on Wall Street. Despite what you probably think, traders are not very nice people, and when they smell blood, they strike. So credit cards are being maxed out, late fees accruing, and mortgage payments are not being made. These are not people likely to be rescued by the federal government and so when they go down, they’ll go down hard. Add a couple of hundred more foreclosure properties to the 300 we have already and what do we get? Just about a doubling of our inventory, all of it bank owned and selling for peanuts. That’s not going to help sustain current values and to this Eeyore, presents a compelling argument against holding on til spring to await the market’s return. We should live so long.