Real estate market, in general, has performed really well over the past few years, with investments earning profits and home prices soaring high significantly in the past 2 years or so. However, it is not always good news. There are other areas in the real estate market that suffered a lot, and one of them is the alarming mortgage application dips all over the country.
World Property Journal has released news about the issue of dipping of U.S. Mortgage applications in late December. There are a handful of reasons that allows this terrible news from happening. Read the news article below to learn more.
U.S. Mortgage Applications Dip in Late December
According to the Mortgage Bankers Association’s latest Weekly Mortgage Applications Survey for the week ending December 28, 2018, U.S. mortgage applications decreased 9.8 percent from two weeks earlier. The results include adjustments to account for the Christmas holiday.
The Market Composite Index, a measure of mortgage loan application volume, decreased 9.8 percent on a seasonally adjusted basis from two weeks earlier. On an unadjusted basis, the Index decreased 46 percent compared with two weeks ago.
The Refinance Index decreased 12 percent from two weeks ago. The seasonally adjusted Purchase Index decreased 8 percent from two weeks earlier. The unadjusted Purchase Index decreased 46 percent compared with two weeks ago and was 6 percent lower than the same week one year ago.
“Mortgage applications fell over the past two weeks – even as the 30-year fixed-rate mortgage decreased to 4.84 percent, its lowest since September 2018. Investors continued to show a preference for safer U.S. Treasuries, as concerns over U.S. and global economic growth, along with uncertainty over the current government shutdown, drove rates lower,” said Joel Kan, MBA’s Associate Vice President of Economic and Industry Forecasting. “Even with lower borrowing costs, both purchase and refinance applications decreased over the two-week holiday period, as both conventional and government applications dropped. Part of the decline in mortgage applications was possibly because of the government shutdown, as concerns over delays in FHA application processing times likely contributed to the weakness in activity.”
While the index changes were calculated relative to two weeks prior, the following compositional and rate measures are presented relative to the previous week only.
The refinance share of mortgage activity decreased to 42.7 percent of total applications from 43.6 percent the previous week. The adjustable-rate mortgage (ARM) share of activity remained unchanged at 7.6 percent of total applications. See full post here…
The entire mortgage applications have decreased about 9.8 percent in December alone, adjusted to the accounts for the Christmas holiday. This shows that a lot of investors are showing more preference to much safer US Treasuries. This is not-so-good news for the real estate market.
Despite the falling mortgage applications, the mortgage rates actually held steady, as written by Deborah Kearns in Bankrate. Learn more about this article below.
Mortgage Rates Hold Steady as Loan Applications Fall and Home-Price Growth Cools
The benchmark 30-year fixed mortgage rate remained stable at 4.62 percent this week, according to Bankrate.com’s latest survey of the nation’s largest mortgage lenders. Meanwhile, the average 15-year fixed mortgage rate rose three basis points to 3.96 percent and the average 5/1 adjustable-mortgage rate ticked up two basis points to 4.27 percent.
Homebuyers and homeowners looking to refinance showed their sensitivity to loan pricing as rates inch up. Total loan applications fell 3 percent from the previous week, according to data from the Mortgage Bankers Association’s applications survey for the week ending Jan. 25.
Applications for purchases slipped 2 percent from the previous week while refinance applications, which tend to be even more sensitive to rate changes, dropped 6 percent, the MBA reported.
“After two weeks of decreases, the purchase index still remained roughly 6 percent above its long-run average, which is good news with the spring buying and selling season almost underway,” said Joel Kan, associate vice president of industry surveys and forecasts with the MBA, in a statement. “Despite ongoing supply and affordability constraints, the healthy job market and underlying demographic fundamentals both point to gradual purchase growth in the coming months.
“Refinance activity had seen a small resurgence in the past few weeks, but there still remains only a small share of borrowers left to gain from rates at the current levels.”
Home-price growth slows
Home prices are still climbing, but the rate of growth is slowing considerably to give some affordability relief to homebuyers.
The growth of U.S. home prices slowed to an annual gain of 5.2 percent in November, down from 5.3 percent in the previous month for all nine U.S. Census divisions, according to the S&P CoreLogic Case-Shiller U.S. National Home Price NSA Index.
Meanwhile, the 10-city composite logged an annual increase at 4.3 percent for November, down from 4.7 percent in the previous month. The 20-city composite saw a 4.7 percent annual gain, falling 5 percent from October.
“Home prices are still rising, but more slowly than in recent months,” said David M. Blitzer, managing director and chairman of the Index Committee at S&P Dow Jones Indices. “The pace of price increases are being dampened by declining sales of existing homes and weaker affordability. Sales peaked in November 2017 and drifted down through 2018.” Click here to read the rest of this post…
This is actually a welcome development considering the mortgage applications in the entire country has significantly declined. This shows homebuyers’ sensitivity to current loan pricing. Home prices, however, are still rising, but the increase has become slow in the past few months.
One factor of the sudden slowdown in mortgage application is the declining sales of existing homes, as well as a lot of people, cannot afford to pay mortgage rates. This is actually to be expected as loan refinancing hit a 20-year low. Check out this article written by Diana Olick in CNBC.
Mortgage Applications Fall, As Refinancing Hits 20-Year Low
- A significant drop in mortgage interest rates was not enough to entice homeowners to refinance their loans last week.
- Total mortgage application volume decreased 0.5 percent on a seasonally adjusted basis compared with the previous week, and is 13.5 percent lower than the same week one year ago.
- Even those homeowners who want to tap some of the newfound equity in their home, given the sharp rise in home values, are more likely to take out a second loan rather than refinance to a higher interest rate.
A significant drop in mortgage interest rates was not enough to entice homeowners to refinance their loans last week. Total mortgage application volume decreased 0.5 percent on a seasonally adjusted basis compared with the previous week, according to the Mortgage Bankers Association. Volume was 13.5 percent lower than the same week one year ago.
Applications to refinance a home mortgage fell 2 percent for the week and were 28 percent lower than the same week one year ago, when interest rates were lower. The refinance share of mortgage activity decreased to 37.2 percent of total applications from 37.6 percent the previous week.
More than half of all homeowners with a mortgage today have rates below 4 percent, according to CoreLogic. Even those homeowners who want to tap some of the newfound equity in their home, given the sharp rise in home values, are more likely to take out a second loan rather than refinance to a higher interest rate. Home equity lines of credit are increasing as refinances decrease.
The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($453,100 or less) decreased to 4.79 percent last week from 4.84 percent the previous week, with points decreasing to 0.41 from 0.42 (including the origination fee) for 80 percent loan-to-value ratio (LTV) loans. See full post here…
Lower mortgage rates and a decline in mortgage applications has resulted in a very volatile financial market in the past months. This volatility is the major cause of worries for both homebuyers and investors. This trend might still continue in the upcoming months, so be ready and informative with your decisions in this type of real estate market.
However, if you really aren’t sure what’s your next move would be, whether you are planning to buy a house, sell your house or invest in real estate, we at Dependable Homebuyers can help you with your decisions. Visit us on https://www.dependablehomebuyers.com to get started.
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