At FREEandCLEAR, we follow the Mortgage Bankers’ Association (MBA) mortgage applications index which measures both purchase and refinance applications for mortgage lenders across the country.  An increase in the MBA applications index reflects an increase in mortgage applications while a decrease in the index reflects a decline in mortgage applications.  After three consecutive weeks of increases, the mortgage application index decreased for the week ended October 24th.

For the week ended October 24th, the refinance application index decreased 7.0% as compared to the prior week, which was up a significant 23.0%.  The purchase application index decreased 5.0% as compared to the prior week, which was also down 5.0%. The composite index, which includes both purchase and refinance mortgage applications, decreased 6.6% as compared to the prior week.  Following three weeks of strong growth, the decrease in the index was not totally unexpected.  Interest rates remained relatively steady as the average interest rate for conforming loans increased slightly to 4.13%, as compared to 4.10% for the prior week.  (Source: Bloomberg)

What it Means for Mortgage Borrowers

The decline in mortgage refinance application activity is not surprising given the strong uptick in activity over the past month, driven by lower interest rates.  The continued decrease in purchase mortgage activity suggests that it may take more time for falling interest rates and moderating home prices to bring buyers into the real estate market.  This is actually positive news for home buyers as fewer buyers means less competition when you are trying to purchase a home.  If interest rates and home prices remain steady, FREEandCLEAR expects home purchase activity to gradually pick up heading into 2015.  First-time home buyers should check out our First-Time Home Buyer Cheat Sheet and monitor interest rates using the COMPARE LENDERS feature on FREEandCLEAR to assess if now is a good time to make a move.

The FREEandCLEAR Mortgage Expert

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There are two primary measures of housing prices that we track at FREEandCLEAR: the Federal Housing Finance Agency (FHFA) House Price Index, which uses certain nationwide mortgage activity to track home prices and the S&P / Case-Shiller Home Price Index, which tracks home prices in 20 U.S. metropolitan markets.  Both indices are reported on a monthly basis and include information for the month that is two months prior to the reporting date.

The FHFA House Price Index for October 2014 showed that August housing prices increased 0.5% as compared to July and 4.8% on a year-over-year basis (so as compared to August 2013).  FHFA House Price Index figures for August came in slightly above analyst expectations and increased relative to the July figures on both a month-over-month and year-over-year basis.  The S&P / Case-Shiller Home Price Index for October 2014 showed that housing prices declined 0.1% in August as compared to July but increased 5.6% on a year-over-year basis, although this increase was less than the 6.7% year-over-year increase reported for July 2014.  The S&P / Case-Shiller Home Price Index came in below expectations and declined relative to the July figures. Although the indices showed slightly different results, both figures show that nationwide housing prices continue to stabilize.  It is important to highlight that these indices reflect the trend in nationwide housing prices and housing prices for a specific region or city can vary significantly.  After months of significant home price appreciation in 2012 and 2013, the trends reflected by the indices suggest that housing price appreciation is leveling off. (Source: Bloomberg)

What it Means for Mortgage Borrowers

A consistent leveling of home prices should draw more home buyers into the market.  Significant home price appreciation has been one of the biggest factors keeping buyers on the sidelines so cooling housing prices could be a significant positive for the mortgage and real estate markets. Stabilizing housing prices combined with lower interest rates create favorable conditions for prospective home buyers.  If you are thinking about buying a home, use the FREEandCLEAR Mortgage Qualification Calculator to determine what size mortgage you can afford and review the COMPARE LENDERS function on FREEandCLEAR to compare interest rates for lenders in your city.

The FREEandCLEAR Mortgage Expert

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The National Association of Realtors pending home sales index tracks the number of existing homes that went into contract to be sold.  When a home seller and buyer agree to the price and terms of a home sale, they sign a contract that outlines the transaction details and the property is said to be “under contract.”  The home sale process is typically completed four-to-six weeks after the property goes under contract so the pending homes sales index is a leading indicator, or predictor, for the real estate market.  An increase in the index reflects an increase in existing home sales while a decrease in the index reflects a decrease in existing home sales.  It is important to point out that the index tracks existing home sales as opposed to new home sales, or homes that are recently constructed that have not been lived in previously.  When people purchase a home they typically get a mortgage so the index also forecasts future activity in the mortgage market. The pending home sales index is released on a monthly basis and provides figures for the prior month.

The pending home sales index report for October 2014 showed that pending home sales in September increased .3% on a month-over-month basis (as compared to August 2014) and increased 1.0% on a year-over-year basis (as compared to September 2013).  The modest increase in the index reverses the small decline in the index reported in the September report.  Lower interest rates and cooling housing prices could be having a positive impact on home sales, which have been inconsistent throughout 2014.  The uptick in the pending home sales report for October combined with positive recent reports for existing home sales and new home sales suggests momentum in the housing market is gradually building as 2014 comes to a close. (Source: Bloomberg)

What it Means for Mortgage Borrowers

The October pending homes sales index report should translate into an increase in existing home sales over the next several months.  Prospective home buyers appear to be slowly entering the market due to more attractive interest rates and home prices on both new and existing homes.  Although the increase in the October pending home sales index report was relatively small, it is a positive sign for the housing and mortgage markets after months of uncertainty.  With market conditions gradually improving, prospective home buyers can use the FREEandCLEAR Mortgage Qualification Calculator to determine what size mortgage they can afford and our COMPARE LENDERS feature to monitor interest rates to determine if now is the right time for them to buy a home.

The FREEandCLEAR Mortgage Expert

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The federal agencies that regulate the mortgage market agreed to a new set of rules that could could make it easier for borrowers to get mortgages in the future.  The new regulations are more noteworthy for the rules that were excluded rather than for the rules that were included.  The initial draft of the regulations included a rule that would have made it more difficult for banks to lend money to borrowers making a down payment of less than 20% of the purchase price of a home.  The final regulations, however, eliminated this rule which should make it easier for borrowers to obtain a mortgage.  Instead of focusing on a minimum down payment, the new rules focus on the borrower’s ability to repay the mortgage and the borrower’s debt-to-income ratio.

What it Means for Mortgage Borrowers

Saving for a down payment can be one of the biggest challenges for someone looking to buy a home so the new regulations may make getting a mortgage and buying a home more accessible for more borrowers.  For example, a borrower may be able to afford a monthly mortgage payment but may not have sufficient savings to make a down payment of 20% of the home price.  Under the new regulations, banks may be more willing to offer a borrower a mortgage even if the he or she makes a down payment of less than 20%.  It is important to point out that if you decide to make a down payment of less than 20%, banks may charge the borrower a higher interest rate or require you to purchase private mortgage insurance (PMI), which is an ongoing fee on top of your monthly mortgage payment, or FHA mortgage insurance premium (MIP) for FHA loans, which is an up-front and ongoing fee on top of your monthly payment.  Additionally, most banks will likely require that the borrower make a minimum down payment of 3.5% for FHA loans and likely 5% for conventional mortgages, in addition to keeping enough money in reserve to cover three-to-six months of your monthly mortgage payment, although requirements for conventional mortgages will vary by bank.  In short, the new regulations could make home ownership more attainable for millions of mortgage consumers.  Check out our discussion of What Size Down Payment Do I Need to Make? and our review of Low and No Down Payment Mortgage Programs on FREEandCLEAR.

The FREEandCLEAR Mortgage Expert

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In our effort to cover important trends that affect the mortgage market, the FREEandCLEAR keeps a close eye on new home sales, which is the number of newly constructed housing units that are sold in a month. The new home sales figure is reported separately from the existing home sales figure, which is the number of previously constructed homes that are sold in a month. The new home sales market is smaller than the existing home sales market but it is still an important indicator for the real estate and mortgage markets. In addition to reporting the number of housing units sold, the new home sales report also includes information on the supply of units for sale as wells as the median and average new home sales price.

The new home sales report, issued on a monthly basis, includes statistics for the prior month. The report for October 2014 showed that new home sales in September increased slightly to an annualized 467,000 units as compared to the revised 466,000 units figure for for August. The September new home sales figure represents one of the strongest reports since the housing crisis in 2008. The number of new homes available for sale, known as supply, increased slightly from 204,000 units in August to 207,000 units in September. The strong new home sales figure is partially attributable to a decline in housing prices as the median new home sales price decreased 9.7% on a month-over-month basis to $259,000. The September new home sales figure exceeded industry expectations as buyers continue to be attracted by flattening house prices and relatively attractive interest rates. (Source: Bloomberg)

What it Means for Mortgage Borrowers
Falling new home sales prices and falling interest rates creates an attractive dynamic for home buyers. The October new home sales report coupled with the October existing home sales report shows that home buyers are slowly moving back into the home purchase market. If you have been considering buying a home but reluctant to enter the market due to high housing prices or interest rates, now may be a good time to start your home search. Housing prices appear to be moderating (although housing prices vary considerably by market) and lower interest rates mean you can afford a larger mortgage and get more house for your money. Use the FREEandCLEAR Mortgage Qualification Calculator to determine what size mortgage you can afford and review the COMPARE LENDERS feature on FREEandCLEAR to keep tabs on interest rates for lenders in your area.

The FREEandCLEAR Mortgage Expert
www.freeandclear.com

At FREEandCLEAR, we follow the Mortgage Bankers’ Association (MBA) mortgage applications index which measures both purchase and refinance applications for mortgage lenders across the country. An increase in the MBA applications index reflects an increase in mortgage applications while a decrease in the index reflects a decline in mortgage applications. Driven by a significant significant boost in refinance application activity attributable to falling interest rates, the mortgage application index for the week ended October 17th, 2014 increased for the third consecutive week.
For the week ended October 17th, the refinance application index increased a significant 23.0% as compared to the prior week, which was up 11.0%. The purchase application index decreased 5.0% as compared to the prior week, which was also down 1.0%. The composite index, which includes both purchase and refinance mortgage applications, increased 11.6% as compared to the prior week. The increase in the index is attributed to the continued decline in interest rates, which has a more immediate impact on refinancing applications, in comparison to purchase applications which typically take longer to respond to changes in interest rates (because it takes longer for consumers to find and buy a home and apply for a mortgage in response to lower interest rates). The average interest rate for conforming loans declined to 4.10%, as compared to 4.20% for the prior week. (Source: Bloomberg)
What it Means for Mortgage Borrowers
The decline in interest rates continues to have a strong effect on existing borrowers who are taking advantage of lower interest rates to refinance their current mortgages. Over time, lower interest rates and flattening home prices should also pull more home buyers into the market and boost purchase mortgage applications. Use the FREEandCLEAR Mortgage Refinance Calculator to determine how much money you can potentially save by refinancing your existing mortgage and lowering your interest rate. Additionally, use the COMPARE LENDERS feature on FREEandCLEAR to monitor interest rates for lenders in your area.
The FREEandCLEAR Mortgage Expert
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In our effort to cover important trends that affect the mortgage market, FREEandCLEAR keeps a close eye on existing home sales, which is the number of previously constructed housing units that are sold in a month.  The existing home sales figure is reported separately from the new home sales figure, which is the number of newly constructed homes that are sold in a month.  An increase in existing home sales reflects improvement in the housing market while a decrease in existing home sales reflects a weakening of the housing market.  In addition to reporting the number of housing units sold, the existing home sales report also includes information on the supply of units for sale as wells as the median and average existing home sales price.

The existing home sales report, issued on a monthly basis, includes statistics for the prior month.  The report for October 2014 showed that existing home sales in September increased 2.4% on a month-over-month basis and decreased 1.7% on a year-over-year basis to an annualized 5.17 million units (so if you take the home sales figure for September and multiplied it by twelve).  Sales of condominiums increased 5.2% to 610,000 units while sales of single-family homes increased 2.0% to 4.56 million units.  The number of existing homes available for sale, known as supply, decreased by 10,000 units to 2.30 million units.  The median existing home sales price decreased 4.0% to $209,700.  The September existing home sales figure came in above market expectations due to due to lower housing prices and attractive interest rates pulling buyers into the real estate market. (Source: Bloomberg)

What it Means for Mortgage Borrowers

The uptick in existing home sales reverses the decline reported in August and suggests that buyers are slowly moving into the market.  The recent decline in interest rates combined with the moderate pullback in housing prices could accelerate the pace of home sales.  As always, FREEandCLEAR will closely watch the existing home sales report for November to monitor this trend.  Check out the COMPARE LENDERS feature on FREEandCLEAR to keep track of interest rates and visit the FREEandCLEAR Mortgage Expert Blog to stay updated on the latest developments in the mortgage market.

The FREEandCLEAR Mortgage Expert

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A key report that reflects the strength of the housing market is the monthly Housing Starts report released jointly by the U.S. Census Bureau, U.S. Department of Commerce and U.S. Department of Housing & Urban Development.  The Housing Starts report includes two pieces of data: starts and permits.  A housing start is counted when construction begins on a new single or multifamily property.  A permit is counted when a permit is issued by a local government to a property owner or builder to begin construction on a new single or multifamily property. Because construction typically begins soon after a new permit is issued, housing starts and permits are typically highly correlated.

The Housing Starts report issued in October 2014 showed that housing starts and permits rebounded in September after a significant decline in August.  The report showed that housing starts increased 6.3% in September to approximately 1,017,00 units while permits increased 1.5% to 1,018,000.  Housing starts exceeded analyst expectations while the permit figure came in slightly below analyst expectations.  The increase in housing starts was driven by a 16.7% jump in the multifamily segment while single family starts showed a more modest increase of 1.1%.  Multifamily permits increased 1.5% in September while single family permits declined by 0.5%.  The single family segment is larger than the multifamily segment.  The Housing Starts report continues to fluctuate on a monthly basis as the September increases compare to a 14.4% decline in starts and a 5.6% decline in permits in August. (Source: Bloomberg)

What it Means for Mortgage Borrowers

Because the Housing Starts report is so volatile, it is challenging to draw significant conclusions from any single month but the October report continues the trend of the multifamily segment out-performing the single family segment.  Additionally, the relatively positive housing starts figures for October are in comparison to disappointing figures for September but the overall pace of new home construction activity continues to increase, albeit at a relatively slow rate. The relative strength of the multifamily segment as compared to the single family segment means that home buyers should have more multifamily options such as condominiums or duplexes when looking for a newly constructed home.  Additionally, it will be interesting to see if the slowdown in single family housing starts pushes more home buyers into the existing home sales market, which showed weakness according to the most recent existing home sales report.  Whether you are thinking about buying a new or existing home, use the FREEandCLEAR Mortgage Qualification Calculator to determine what size mortgage you can afford and check out our Mortgage Expert Insights for money and time-saving mortgage advice and tips.

The FREEandCLEAR Mortgage Expert

www.freeandclear.com