Mortgage Applications Increase 15.5%, Highest Jump Since June

By Stevie Duffin Updated on 9/25/2013

A sudden spike in home purchase a refinance activity pushed mortgage application rates to a recent high this past week.  Applications increased 15.5% from the week previous, a large and mostly unexpected jump.  The last time mortgage applications leapt this high in a comparatively short period was June of 2010.

The news isn't all good, though.  Analysts and economists believe the spike was fueled by investors trying to pick up additional homes at low mortgage rates.  Investor activity of this kind doesn't provide any indication that the housing market is on its way toward recovery but instead merely points to assets changing hands and capital moving around.  In order to truly stabilize the residential real estate sector, first time home buyers and new owners are needed.

These buyers can't enter the market due to a unique and frustrating bottleneck in the form of underwater homes.  Many current homeowners are stuck and unable to sell their properties due to negative equity, preventing "trade-ups."  This puts added pressure on first time home buyers.  CoreLogic, an industry data group, recently released updated information showing that almost 25% of all homes are underwater, trapped in negative equity.  “Until the high level of negative equity begins to recede, the housing and mortgage finance markets will remain very sluggish,” said CoreLogic chief economist Mark Fleming.

According to the firm's research, 65% of homes in Nevada are underwater, while 51% of homes in Arizona and 47% of homes in Florida face similar equity constraints.  And those are just the leaders.  The negative equity crisis has taken victims all across the nation.

Still, all mortgage activity is good activity at this point.  As long as capital is moving in the industry, there is the potential for value to be created.  Time will tell whether the increased application rate will become a trend or merely an arbitrary blip on the housing radar.