Reply #85: Mortgage lending at lowest level since 1997

[Demeter]

http://www.mcclatchydc.com/2011/08/18/121119/mortgage-lending-at-lowest-level.html

IN OTHER WORDS, BACK TO PRE-BUBBLE LEVELS...AND IT'S ALL REFIS, ANYWAY...

Despite near-record-low mortgage rates and the cheapest housing prices in eight years, home lending has slipped this year to the lowest level since 1997. The laggard loan market can be explained in part by the slow economy, numerous foreclosures and the proliferation of "underwater" loans, those that exceed the value of the properties they secure. But other factors are compounding the problem, including so-called refi burnout - how many times, after all, can one refinance a home? - and a wave of people who have simply decided that homeownership isn't what it was cracked up to be...

In 2003, as the housing boom took hold and 30-year fixed mortgage rates fell below 6 percent, refinancings propelled home lending to four times the current volume. And as the rate tumbled toward 5 percent and then smashed that barrier in 2009 for the first time since 1956, there was twice as much mortgage lending as now. "There is a burnout phenomenon," said Mortgage Bankers Association economist Michael Fratantoni. In addition, many would-be refinancers have been stopped by the declines in home prices, now back at 2003 levels, which has left them owing far more than their homes are worth. "Borrowers who couldn't qualify for 4.5 percent mortgages last year for the most part still can't qualify this year," Fratantoni said.

And getting the purchase market up and running again would require "significant job growth," he said, something that has failed to materialize in the sluggish recovery that now is threatening to fall back into recession.

The result of all this: Despite the confluence of lower home prices and rates, new mortgages are down by a third compared with 2010. Lenders will write about $1 trillion in home loans this year, the smallest total since 1997, according to the Mortgage Bankers Association, which projects home lending will fall even lower in 2012...among younger buyers, "there's not much feeling that they need to buy right away," Fratantoni said. "I expect that may change over the next couple of years, but certainly for the first-time buyer there's less near-term demand."

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