by Calculated Risk on 12/08/2010 08:01:00 AM

The MBA reports: Mortgage Applications Decrease in Latest MBA Weekly Survey

The Refinance Index decreased 1.4 percent from the previous week. This is the fourth weekly decrease for the Refinance Index which reached its lowest level since June 2010. The seasonally adjusted Purchase Index increased 1.8 percent from one week earlier. This is the third weekly increase for the Purchase Index which reached its highest level since early May 2010.
...
The average contract interest rate for 30-year fixed-rate mortgages increased to 4.66 percent from 4.56 percent, with points decreasing to 0.95 from 0.96 (including the origination fee) for 80 percent loan-to-value (LTV) ratio loans.

Click on graph for larger image in new window.

This graph shows the MBA Purchase Index and four week moving average since 1990.

A few points:
• Mortgage rates were up even more yesterday.

• Refinance activity is falling quickly as mortgage rates rise.

• However purchase activity is picking up a little, possibly because some buyers are accelerating purchases because they are afraid of future rate increases.

Even with the increase in applications (seasonally adjusted), the four-week moving average of the purchase index is about 17% below the levels of April 2010 and suggests weak existing home sales through the end of the year and into January.

by Calculated Risk on 12/07/2010 11:50:00 PM

From David Leonhardt at the NY Times: For Obama, Tax Deal Is a Back-Door Stimulus Plan

Mr. Obama effectively traded tax cuts for the affluent, which Republicans were demanding, for a second stimulus bill that seemed improbable a few weeks ago. Mr. Obama yielded to Republicans on extending the high-end Bush tax cuts and on cutting the estate tax below its scheduled level. In exchange, Republicans agreed to extend unemployment benefits, cut payroll taxes and business taxes, and extend a grab bag of tax credits for college tuition and other items.

As a stimulus package, this is very poorly designed. It will help a little ... but at a very high cost.

by Calculated Risk on 12/07/2010 08:27:00 PM

From "Soylent Green is People":

[I]t's been a complete bloodbath in the market for us. ... Three rate sheets for the worse, an average 4.75% 1.0 point loan today, well up from the October lows of 3.750%. Crushing to say the least.

From economist Tom Lawler:

Benchmark US interest rates are up sharply today in at times frantic trading in response to the tax package “deal” reached between the administration and Congressional Republican leaders. (While yesterday’s silly “60 Minutes” bond market rally lasted longer than an hour, it wasn’t by much!!!) The MBS market also got crushed today, and indicative 30-year conventional conforming fixed-rate quotes, which had moved lower following Friday’s employment report, jumped up sharply today, with most lenders showing something in the range of 4 ¾% and 1 point (for a 60-day lock).

This will impact refinance activity immediately, but might accelerate some purchase activity because of a fear of further rate hikes.

by Calculated Risk on 12/07/2010 04:03:00 PM

Just to be clear, the "extension of the unemployment benefits" is an extension of the qualifying dates for the various tiers of benefits, and not additional weeks of benefits. There is no additional help for the so-called "99ers".

Emergency Unemployment Compensation (EUC) comes in four tiers:
Tier I is for 20 additional weeks;
Tier II is for up to 14 weeks;
Tier III is for up to 13 weeks;
Tier IV is for up to 6 weeks.

As an example, if a worker was receiving Tier I benefits, they will be able to move to Tier II benefits with this proposed extension. Without the extension of the qualifying dates, workers would not be able to move to the next tier.

These two tables are from the Center for Budget and Policy Priorities. The total number of weeks depends on the state unemployment rate.

In 25 states, workers can qualify for 99 weeks of unemployment:

To repeat: this extension doesn't add additional weeks of benefits; it keeps the above structure in place for an additional 13 months.

by Calculated Risk on 12/07/2010 01:06:00 PM

From the Financial Times: EU banks face new stress-tests

A new round of co-ordinated stress-tests on European banks would begin in February ... The “scope and methodology” of the new round of tests was still under discussion, [Olli Rehn, EU commissioner for economic and monetary affairs ]said, but should be disclosed fairly shortly.

The last round of stress tests were heavily criticized - and all of the Irish banks passed the tests only to fail a few months later.

And from the NY Times: Iceland Breaks Out of Recession

Iceland broke out of recession in the third quarter of this year, official data showed Tuesday ... Unlike Ireland and Greece ... Iceland allowed private banks to fail, and its currency, the krona, has declined by about 46 percent against the dollar since the start of 2008.

That isn't currently an option for Ireland, Greece, Portugal or Spain ...