Weekly Recap (9/27/10-10/2/10)by Tim Manni
When mortgage rates dropped below 5.5 percent, just about everyone who could refinance hopped on the bandwagon. But rates continued to drop, shattering record after record, and homeowners who refinanced just months ago are considering doing it again.
Is serial refinancing just silly?
According to the Curious Capitalist, refinancing too often can set back wealth-building in a big way, because every time you refinance, you begin paying your mortgage all over again. In the early years of a mortgage, the lender gets the bulk of the payment as interest. Author John Curran contends that restarting that process is, in his words, “a loser’s game.”
A new survey suggests that a growing number of Americans believe that the economy won’t return to pre-recession levels for years to come:
Fifty-nine percent of Americans feel “not good” or “bad” about the direction the economy is headed, up from 49% in May. And 76% don’t expect their quality of life, including their spending levels, to return to pre-recession levels until 2012 at the earliest, up from 63% who said that in May. That’s according to the findings of a survey released today by AlixPartners LLP, the global business-advisory firm.
The poll also finds that 74% of Americans feel the same or worse today about their personal economic situations versus a year ago, up from 71% who had that negative sentiment in May, and, in what could be a sign of either growing discontent or growing resignation in the run-up to the November elections, just 30% of Americans said that Democrats’ losing control of the U.S. House or even of the U.S. House and Senate would have a substantially positive impact on the economy in the coming year.
On a bi-monthly basis, HSH.com releases their Two-Month Forecast for Mortgage Rates. In each forecast, we review our previous prediction — evaluating the circumstances that caused rates to do what they did — and we examine current factors and conditions in order to forecast mortgage rates over the next nine weeks or so.
Each two-month forecast is made up of four parts: the preface, a recap of our previous prediction, the forecast discussion and finally the forecast itself. We’ll do a short summary of each section here on the blog, but be sure to visit HSH.com to read our entire forecast.
“All I want is the opportunity to refinance.” That’s the overwhelming message we’re hearing from underwater borrowers.
Until now, negative equity has denied underwater borrowers the opportunity to refinance. On August 6, the FHA announced a program — the FHA Short Refinance option — that’s designed to help these borrowers refinance. However, many critics (including us) feel as though the FHA’s strategy will cause the program to fall well short of the lofty goals it set out.
Why? The main reason is due to the fact that lenders are required to reduce a borrower’s principal by at least 10% right off the bat.
It takes a lot more than just low mortgage rates to spin the wheels of the housing market; and that couldn’t be more apparent than it is right now. Mortgage rates continue to fall week after week — according to HSH.com the weekly average for the 30-year Conforming fixed rate fell to 4.69% (week ending 7/16/10) — and yet the Mortgage Bankers Association reported the lowest level of mortgage application activity since 1996.
The latest issue of HSH’s Market Trends Newsletter spins the same cautionary tale: low mortgage rates alone won’t help the housing market recover anytime soon. The latest Market Trends — “Mortgage rates steady, housing weak” — explains that, especially in a deflationary environment, and at a time when there is virtually no support for job growth, low mortgage rates can only contribute so much to the overall improvement in housing (at least at the moment)…