Mortgage Applications Down and Rates Up Again

By Kyle Chezum Updated on 3/30/2011

Applications for mortgages in the US fell as rising mortgage interest rates dealt another blow to the refinance market.  The Mortgage Bankers Association reported a 7.5% decrease in mortgage applications overall for the week.  Michael Fratantoni, vice president of research and economics for the MBA, said homeowners lose both the "incentive ad the ability to refinance" as rates increase.  Right now, mortgage rates are getting back up to 5% levels.

This likely doesn't spell good news for the troubled housing sector, which remains bogged down in shadow inventory due to foreclosures and depressed home values.  Fratantoni reported, "Purchase volume remained roughly flat as we enter what is typically the peak homebuying season."

Still, the economy does appear to be slowly but surely headed toward a recovery.  In March, the private sector added 201,000 jobs, a meaningful increase that signals growth despite the fact that February brought approximately 7,000 more jobs.  The rate of job loss has decreased almost 40% since this time last year.

In addition to this, CoreLogic, a real estate data firm, recently released a new report showing that the nation's foreclosure shadow inventory has, in fact, decreased by 11% from one year ago.  This news is surprisingly good, in spite of recent estimates by economists that the current shadow inventory accounts for roughly $450 billion in lost mortgage revenue.  This glut of devalued homes is one of the major forces in opposition to the housing recovery, which likely won't kick into high gear until the foreclosure market has been tapped almost dry.