Here’s more evidence of the effect of the government meddling in the marketplace. It’s sort of like the cliché about pushing on a balloon: no matter where you push, the balloon will expand somewhere else.
The Mortgage Bankers Association (MBA) today released its Weekly Mortgage Applications Survey for the week ending May 14, 2010.
Refi applications were up over the previous week while purchase applications were down significantly. This was attributed to the expiration of the homebuyer tax credit. Additionally, most interest rates were lower than the previous week.
“Purchase applications plummeted 27 percent last week and have declined almost 20 percent over the past month, despite relatively low interest rates. The data continue to suggest that the tax credit pulled sales into April at the expense of the remainder of the spring buying season. In fact, this drop occurred even as rates on 30-year fixed-rate mortgages continued to fall, and at 4.83 percent are at their lowest level since November 2009,” said Michael Fratantoni, MBA’s Vice President of Research and Economics. “However, refinance borrowers did react to these lower rates, with refi applications up almost 15 percent, hitting their highest level in nine weeks.”
So the homebuyer tax credit simply shifted buying activity to earlier than the buyers otherwise might have acted.