Mortgage Applications Rose

NEW YORK [Reuters] 9/14/06— Mortgage applications rose for a second consecutive week as demand for home purchase loans hit its highest level in two months, an industry trade group said Wednesday.
The Mortgage Bankers Association said its seasonally adjusted index of mortgage application activity, which includes both refinancing and purchasing loans, for the week ended Sept. 8 increased 3.2% to 584.2, its highest since mid-May.
FORECLOSURES INCH HIGHER: But late payments fall in Q2
Borrowing costs on 30-year fixed-rate mortgages, excluding fees, averaged 6.32%, edging up 0.01 percentage point from the previous week. Interest rates were above year-ago levels of 5.72%, but below a four-year high of 6.86% touched in June.
The MBA's seasonally adjusted purchase mortgage index, widely considered a timely gauge of U.S. home sales, rose 5.3% to 410.2, its highest since early July. The index, however, was substantially below its year-ago level of 513.4.
The group's seasonally adjusted index of refinancing applications increased 0.1% to 1,597.0. A year earlier the index stood at 2,198.7.
The refinance share of applications decreased to 40.3% from 41.0% the previous week.
Fixed 15-year mortgage rates averaged 5.98%, up from 5.97%. Rates on one-year adjustable-rate mortgages (ARMs) increased to 5.96% from 5.91%.
The ARM share of activity decreased to 25.5% of total applications from 26.2% the previous week, its lowest level since October 2003.
After historically low mortgage rates fueled a five-year housing boom, a deluge of recent data showing a surge in the number of homes for sale and dwindling demand signals the once-robust market is cooling, industry analysts say.
Prices have started to level off and even decline in some geographic areas as the gap between the supply of homes for sale and demand for housing has increased.
The MBA's survey covers about 50% of all U.S. retail residential loans. Respondents include mortgage banks, commercial banks and thrifts.

Let's Shvo: Real Estate Becomes Fashion

[Real Deal] 9/13/06

If Gordon Gekko stepped out of the 1987 film "Wall Street" and into today's New York real estate market, he might look like Michael Shvo. The character played by Michael Douglas often touted the sheer thrill of dominating the deal – any deal – and became the fictional personification of the heady days of the late 1980s stock market.Shvo, founder and CEO of his eponymous firm, could be considered the embodiment of the still-booming New York housing market.Reviled by some and admired by others, barely into his thirties and less than a decade into real estate, Shvo, formerly a top producer at Douglas Elliman, is head of a year-old company that's marketed luxury condos such as the Lumiere and Bryant Park Tower, and paired noted architects with developers. The controversial marketer said his edge is bucking conventional wisdom when it comes to understanding buyers, especially younger ones.The Real Deal recently sat down for a chat with Shvo as part of our regular podcast series. The entire interview can be heard under the "Audio Interviews" section of the Web site. THE REAL DEAL: How do you market projects differently than your competitors?SHVO: We look at real estate as a luxury brand. I'm not selling four walls. What we do is probably 20 percent real estate, 80 percent branding and marketing. Real estate to me today is a complete luxury brand. I'm marketing real estate the same way that Gucci is marketing their sunglasses, Chanel is marketing their perfume, the same way that Ferrari is marketing their new F430. Our whole idea is not to market real estate as another piece of real estate.TRD: Where do you draw your employees from?SHVO: A lot of people I've hired are not real estate people. I bring in a lot of people from fashion companies, people from investment banking, some people from other marketing companies. Right now, we have over 50 people working here. We are not a brokerage company – that's something that most people know or don't know.TRD: This is sort of the requisite question to be asked: Do you think there's a housing bubble above the New York market?

SHVO: The people that have created the bubble is the press. If you look at the fundamentals of the market, there is no real reason for the market to go the other way. I still don't think that the supply is going to overdo the demand in New York. If you think of the fundamentals of the housing market in New York, there are just over 2 million residential units in the city. There are 65,000 condo units. The proportions are so wrong between the two numbers.But if we are going to see the press continually write negative articles and talk about the bubble and say that there is a bubble, eventually they will be able to get into people's heads and change their mood. Because people today are not only buying because they necessarily need housing, they are buying because they are in the mood.[However], I do believe that a year from now – and you have this on tape – you are going to see products sit on the market. It doesn't mean that the market is going to go down. But today people are buying like herds. Right now, there is very little inventory still, so they are buying what's out there. The minute that you are going to want to live in Chelsea, and there are eight buildings and you can go to eight sales offices, you are going to be able to decide where you want to live, and the market is not going to decide for you where you're going to live.

RATES STABLE IN HOLIDAY-SHORTENED WEEK

[Lenny Holler, Preferred Empire Mortgage Company]

This week’s holiday-shortened slate of economic news raised some concerns about the threat of inflation. Unit labor costs, a measure of the cost of productivity, were revised upward significantly for both first and second quarters, and much higher than expectations. On the other hand, productivity growth for the second quarter only remained steady, being revised up moderately to an annualized 1.6%. In its "Beige Book," the Federal Reserve Board noted continued economic expansion from mid-July through late August, though higher costs for energy and construction dampened growth in some areas.

Despite the slightly worse news on inflation, the week ended well with oil prices making new lows into the mid $60 range and the president of the Cleveland Fed (who sits on the Fed's rate setting committee) noting in a speech that while she remains concerned about inflation, the Fed's previous efforts to fight such a general rise in prices, including more than two years of interest-rate increases, are still taking hold as the economy slows. This would support the idea that the Fed is done raising rates for now. It still seems likely that the incoming data will be crucial in making any determinations on the direction of rates. With the data we have seen thus far, it appears that rates should continue to stabilize at these lower levels. Inflation numbers for August will be watched with interest when next Friday’s report on the Consumer Price Index is released. Also due next week are reports on international trade (Tuesday), retail sales and business inventories (Thursday), and industrial production (Friday).

· 10 year treasury yield up for the week from 4.72% to 4.77%. 2 year treasury up from 4.76% to 4.81%.
· Oil down sharply for the week from $69.19 per barrel to $66.25. Gold down from $624.40 per oz. to $609.60.
· The dollar was down versus the yen from 117.11 to 116.90 and the Euro was down against the dollar at $1.2671 from $1.2839.
· Stocks were down for the week (S&P500 down 0.92%, Dow Jones down 0.63% and Nasdaq down 1.25%).