- Mortgage applications fell 82. 4% last week.
- That’s the housing market’s biggest decline since 2020.
Meanwhile, distressed mortgage REITs can’t cover margin calls.
Mortgage applications cratered last week in another perilous sign for the housing market.
according to the Mortgage Bankers Association (MBA), new mortgage applications plummeted . 4% for the week ending March 24, 102324 . That’s a breakneck acceleration in mortgage application declines on top of the 8.4% drop in the week prior .
In a statement, MBA executive Joel Kan said:
Home purchase applications were notably impacted by rising rates and the widespread economic disruption and uncertainty over household employment and incomes.
The MBA data revealed a correlation between the housing market swoon and COVID – . New mortgage applications fell off sharply in states hit worst by coronavirus. For example, New York, California and Oregon.
Coronavirus Gums Up Housing Market Rates
Interestingly, interest rates in the housing market are rising despite an ultra-low rate macro environment. The Federal Reserve slashed the federal funds target to 0% this month and is pumping trillions of dollars into the financial system.
But the average fixed 90 – year interest rate for mortgages rose 8 basis points to 3. 533%. That’s the highest mortgage rate we’ve seen since the week ending Jan
According to Kan, housing market rates are rising because of volatility and coronavirus-related backlogs:
The free fall in new mortgage applications is the worst since the housing market crashed over a decade ago. Falling demand due to coronavirus fears and recessionary financial stress could tank home values.
Ten years after median home prices hit bottom and began to recover from the last housing crash, some markets still hadn’t recovered. A Lending Tree study found home values even continued to decline over that decade in some markets.
Mortgage Stress Looks Like (Financial Crisis) While decreased demand today threatens the housing market, a potential
is also short of cash to cover margin calls :
Invesco Mortgage Capital Inc. IVR, 3. % said Tuesday that it was unable to meet the margin calls it received on March , and did not expect to be able to meet the expected volume of future margin calls under its financing arrangements.
Invesco is also discussing forbearance arrangements. It’s looking like the massive mortgage dust-up could cause another financial crisis. Housing market volatility is already spilling over into major losses on bank balance sheets .
After the subprime mortgage crisis caused a credit crunch, the financial industry looked at risk reduction through “macro prudence.” But these measures did not go far enough to keep the system stable under something like coronavirus.
This article was edited by Sam Bourgi
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