Sarasota-Bradenton Mortgage Acitivity Heats Up

Mortgage activity heats up
Herald-Tribune
Thursday, March 26, 2009

Mortgage applications soared last week by 32 percent after the Federal Reserve said it would buy billions of dollars in Treasury bonds and mortgage-backed securities, but Southwest Florida brokers and others said borrowers -- like home buyers -- continue to chase a bottom.

Following the rates has become challenging in an environment where they swing wildly. Everyone is trying to lock in the best deal, but the volatility amidst the financial crisis is like nothing most brokers have seen. This region has seen a strong increase in activity, but it would likely be bigger with more stable rates.

"We're really in uncharted territory," said Marci Walker, with Bradenton-based Blue Skye Lending, on Wednesday. "Anything can trigger the markets one way or the other right now."

But the Sarasota-Bradenton market is seeing a large increase in the refinancing business, and new loans for purchases have been growing among first-time buyers and for lower-priced homes, brokers said. Tom Flood at Sarasota's Covenant Mortgage said his home loan activity is up several hundred percent from just a few months ago.

"It's starting to feel more like a normal market," Flood said. "Homebuyers' activity has picked up dramatically and my phone is ringing off the hook." Flood credits the government's intervention; especially the tax breaks and Fed induced low interest rates.

"I'm hearing it from everyone across the board," he said. "It's a general uptick all around and it may be because everybody is starting to believe we might be at the bottom" in pricing."

That bodes well for a region that has been struggling with a huge inventory of unsold properties both in the existing and new home markets.

The Mortgage Bankers Association reported Wednesday that its weekly application index climbed 32.2 percent for the week that ended Friday. The index came in at 1159.4, up from 876.9 a week earlier. The lion's share came from borrowers looking to refinance home loans at lower rates. The index remains well below 1,856.7, the peak reached in May 2003 at the height of the housing boom.

The stronger mortgage demand came as the Commerce Department reported new home sales rose to a seasonally adjusted annual rate of 337,000 in February from January's 322,000.

Some analysts remained skeptical that the report demonstrated a new housing bottom. The results, while better than the drop to 300,000 units many expected, were the second-worst on record.

Mortgage gyrations
When the Federal Reserve announced its buying plan last week, mortgage rates in the Sarasota-Bradenton market dropped to the mid-4 percent range for a 30-year, fixed-rate mortgage with no points. But the next day, they began creeping back up, and now hover around 5 percent.

Nationally, the average rate dipped last week to 4.63 percent from 4.89 percent a week earlier, according to the Mortgage Bankers Association report.

"Rates are changing so quickly, you feel like you have to jump on it that afternoon or it's going to be gone," said Walker, who recommends her clients, especially the ones looking to refinance, prepare all of the paperwork ahead of time so that they can move quickly. "We tell them, 'Get us everything we need, so we're ready to lock you in when you have that rate you want.'"

Customers either ask to be called when rates hit a certain level, to see if they want to move forward, or they can even specify a certain target rate that authorizes the broker to pull the trigger, she said.

In the past, brokers could generally predict changes in mortgage rates by looking at the long-term bond market. But as the financial crisis has unfolded, that no longer seems to apply, said Steve Schneider, with Miami-based Abacus Lending.

The fluctuations have been dizzying: "On Thursday, I saw two rate increases, another increase on Monday, and it moved up from there," he said. That has some borrowers reluctant to commit because they do not want to miss out. "Some people are sitting on the fence, They want to get in at the lowest rate. The problem is no one knows what the lowest will be," Schneider said. Volatility in home values also means banks are having a difficult time knowing whether the loans they make are properly priced.