Mortgage Applications Hold Steady

From CNNMoney.com - "Mortgage applications unchanged at 5-year peak":

Demand for U.S. mortgage applications was unchanged during the Christmas holiday week, holding the highest levels in more than five years with loan rates near record lows, an industry group said on Wednesday.

Borrowing costs have tumbled more than 1-1/2 percentage points from summer peaks and are widely expected to slide further as the government steps in to stabilize the worst housing market since the Great Depression.

The Mortgage Bankers Association's seasonally adjusted index of mortgage application activity was unchanged last week at 1,245.7, matching the highest level since July 2003 set the previous week.

The skinny:

Fast-falling mortgage rates are driving demand, particularly for refinancing.

Fixed 30-year home loan rates averaged 5.03 percent last week, marginally lower than 5.04 percent a week earlier but well below the 6.59 percent summer peak in July, according to the Mortgage Bankers Association.

Last week's rate was the lowest since June 2003, the trade group said.

These cheap mortgage rates are great but:

The government interventions "can drive down primary mortgage rates and make getting loans much more affordable, make a borrower's monthly payments lower -- if they can qualify," he said on Tuesday.

Let me also add that these cheap mortgage rates mean nothing to someone who wants to refinance, is credit worthy, but their home no longer appraises since values have dropped so dramatically. Unfortunately, thousands of people fall into both categories. Either no longer credit worthy or credit worthy with a house underwater. Regardless of what bucket most people find themselves trapped in, these times benefit the usual suspects, the ones who need the least amount of help.

All in all, the present status of many housing markets look bad, but there are many underlying aspects that are subtly working towards repairing this housing mess. Mortgage rates are down significantly, (like it or not) the government is throwing unbelievable amounts of money at the problem and some of it will stick, sales numbers and inventory levels in the West seem to be showing signs of some stabilization, values have dropped dramatically in many locales (and have been doing so since July / August of 2005 in some CA markets). Despite the healing that is trying to take place, our current economic stresses and foreclosure madness are making it nearly impossible for these markets to improve because of absurd inventory levels, continued affordability issues, and lack of available credit for most.

Merely stating the obvious, housing values need to stop dropping, people need to be able to comfortably pay their mortgages, and inventory needs to melt away. Until then, the pain will remain and home values will continue to drop as the ultimate equalizer to affordability. Unbelievable opportunities will abound for those who see opportunity where everyone else sees risk and remains paralyzed by fear.