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.

The mortgage applications index dipped slightly for the week ended April 24th.  Home purchase mortgage applications were unchanged for the week after increasing 5.0% for the prior week.  The refinance applications index decreased 4.0% after increasing 1.0% for the prior week.  The composite mortgage application index, which includes both home purchase mortgages and refinancings, decreased 2.3%, reversing a 2.3% increase for the prior week.  Despite the pullback in application activity for the current week, the mortgage application index has  increased four of the past six weeks, showing the overall strength of the mortgage market.  Low interest rates continue to be a key driver of the real estate and mortgage markets.  Mortgage rates remained attractive as the average interest rate for conforming loans (mortgage amount less than $417,000) increased slightly to 3.85% as compared to 3.83% for the prior week.  (Source: Bloomberg)

What it Means for Mortgage Borrowers

With the strong performance of the mortgage application market over the past month and a half you are bound to see some up and down fluctuations in the index from week to week.  After increasing the prior week, purchase mortgage applications remained unchanged for the current week demonstrating that home buyers are able to obtain mortgage financing for their purchases.  Attractive interest rates continue to pull prospective buyers off the sidelines and into the marketplace.  Although refinance applications dropped for the current week, low rates mean that current homeowners should evaluate if now is the right time to refinance.  Prospective home buyers can use the Mortgage Selector Calculator on FREEandCLEAR to determine what size mortgage they can afford and the mortgage program that is right for them.  Current home owners can use our Refinance Calculator to determine how much money you can save by refinancing.  And both prospective and current home owners can use the INTEREST RATES feature on FREEandCLEAR to compare mortgage rates and fees for lenders in their area.

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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.

Pending home sales increased for the third consecutive month with the pending home sales index for March increasing 1.1% on a month-over-month basis (as compared to February 2015) and 11.1% on a year-over-year basis (as compared to March 2014).  The increase in the index matched the midpoint of  analyst expectations and follows a 3.6% increase in the index reported for February.  The increase in the pending home sales index was driven by gains in the nation’s two largest housing markets — the South (up 4.0% on a monthly basis and 12.4% on an annual basis) and the West (up 1.7% on a monthly basis and 15.6% on an annual basis).  Although the rate of increase for the index slowed in March as compared to February, pending home sales are on a winning streak having been in positive territory every month this year.  The favorable pending home sales report bodes well for future existing home sales and mortgage applications as home buyers under contract finalize their financing and purchases over the next one-to-two months.  (Source: Bloomberg)

What it Means for Mortgage Borrowers

A string of strong pending home sales reports combined with the recent robust existing home sales report for April show that home buyers are gravitating toward the existing home market.  Existing home buyers are taking advantage of low interest rates, available mortgage financing and lower price points as compared to the new home sales market.  The existing home sales market is significantly larger than the new home sales market so the positive reports on pending and existing home sales reflect the growing strength of the broader real estate and mortgage markets.  Prospective home buyers are finding attractive properties to buy and qualifying for mortgage financing to complete their home purchases.  If you have been contemplating buying a home, now may be a good time to start the process.  Use the Mortgage Qualification Calculator on FREEandCLEAR to determine what size mortgage you can afford and use our INTEREST RATES feature to review mortgage rates and fees for lenders in your area.

The FREEandCLEAR Mortgage Expert

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According to a recent report from the U.S. Commerce Department, the rate of homeownership hit a 26 year low of 63.8% in the first quarter of 2015.  The 63.8% figure represents a slight drop compared to the 64.5% homeownership rate reported by the U.S. Census Bureau for 2014.  The homeownership rate peaked at 69.0% in 2004 and has been declining over the past eleven years.

Part of the explanation for the drop in the homeownership rate is the increase in the number of households that are renting, which increased by more than 1.8 million households as compared to the first quarter of 2014.  One of the reasons for the increase in the number of renting households is that more young people are moving out of their parents’ houses and into their own places.  In many cases, renting a house can be the first step before you buy a house so the jump in rental households is a positive indicator for the homeownership rate in the future.  The report, however, also points to the many significant challenges that persist for prospective home buyers including the ability to save for a down payment, tighter credit and lending standards and a tenuous although improving job market.  This is especially true for first-time home buyers, a segment of the population that continues to represent a declining portion of the real estate market.  Additionally, millions of past homeowners that lost their homes to foreclosure or default during the real estate market collapse face the added challenge of trying to qualify for a mortgage with damaged credit.  All these factors combine with a more complicated mortgage process to make buying a home less attainable for more people.

All these reasons are why we developed FREEandCLEAR and make it available to users for free.  We cover programs designed to help first-time home buyers get a mortgage and also outline how past credit challenges impact your ability to get a mortgage.  Additionally, our Mortgage Calculators help you understand what size mortgage you can afford while our Mortgage Process Guide offers money and time-saving tips and insights.  We understand that the mortgage process can be overwhelming and frustrating so we provide borrowers with the best tools and resources in the business to help them achieve their mortgage goals.  We believe that smarter, more empowered borrowers make better decisions when they get mortgages.  By offering borrowers the best tools, resources and rates we hope to reverse the current trend and help more people realize their dream of owning a home.

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 April 2015 showed that February housing prices increased 0.7% as compared to January and increased 5.4% on a year-over-year basis (so as compared to February 2014).  The FHFA House Price Index for February came in slightly above the range of analyst estimates and improved relative results for January 2015 which showed a 0.3% increase on a monthly basis and a 5.1% increase on a year-over-year basis.  The FHFA House Price Index shows that home prices are appreciating at a somewhat faster pace which suggests increasing demand from home buyers.  The S&P / Case-Shiller Home Price Index for April 2015 showed similar strong results with housing prices increasing 0.9% in February, as compared to January, and increasing 5.0% on a year-over-year basis, which represents an increase as compared to the 4.6% year-over-year growth reported in January.  The S&P / Case-Shiller Home Price Index for January came in at the high end of the range of analyst projections.  Both the FHFA House Price and S&P / Case-Shiller Home Price indices continued a strong run that started in late 2014.  Improving home prices may encourage more home owners to sell thereby bringing more supply on the market although the jump in the rate of price appreciation is a cause for concern for home buyers.  (Source: Bloomberg)

What it Means for Mortgage Borrowers

The home price indices reports offer both good and bad news for mortgage borrowers.  The increase in home prices is positive because it reflects and improving housing market as well as borrowers’ ability to obtain mortgages.  Additionally, an increase in home prices typically leads to more home owners selling their properties, increasing the supply available for prospective buyers.  On the flip side, an increase in prices makes homes less affordable for prospective home buyers.  Low interest rates help to offset increasing home prices but more significant price increases in the future could hinder the real estate and mortgage markets.  If you are thinking about buying a home within the next year, review the FREEandCLEAR downloadable Mortgage Process Guide which offers numerous time and money-saving tips.  Additionally, use our INTEREST RATES function to review mortgage rates and fees for lenders in your area and contact lenders to get pre-approved for your mortgage.

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In our effort to cover important trends that affect the mortgage market, 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.

Breaking a streak of three consecutive months of positive reports, the new home sales report for April showed that new home sales declined 11.4% in March to 481,000 annualized units, as compared to 543,000 annualized units in February.  The March new home sales figure fell at the bottom end of industry analyst expectations and follows a disappointing April housing starts report to show weakness in the home builder market.  The drop in demand for new homes impacted prices with the March median new home sales price decreasing 1.5% to $277,400.  Driven by the drop in sales and a 4,000 unit increase in inventory, supply as compared to monthly sales increased to 5.3 months in March as compared to 4.6 months in February.  The largest housing region, the South, showed the most weakness, with sales off 15.8%.  The Northeast and West regions also showed declines with the Midwest region being the sole bright spot, with sales increasing 5.9% on the month.  The weak new home sales report is in stark contrast to the strong April existing home sales report which saw a significant jump in activity.  (Source: Bloomberg)

What it Means for Mortgage Borrowers

Although the April new home sales report is disappointing, it is important to highlight that the new home sales market is significantly smaller than the existing home sales market.  Additionally, strong March gains in existing home sales suggest that buyers continue to be active in the real estate market and are able to obtain mortgages to finance their home purchases.  The median new home sales price is approximately 25% higher than the median existing home sales price so buyers could be gravitating toward lower priced properties, at least for March.  Although new home supply increased in March, supply relative to sales remains relatively low and FREEandCLEAR expects home builders to continue to bring new inventory to market.  With low interest rates, increased supply and flat-to-declining home prices, now may be a good time for potential home buyers to look at new homes.  Use the Mortgage Qualification Calculator on FREEandCLEAR to determine what size mortgage you can afford and check out our new and improved Mortgage Process Guide to walk you through the mortgage process step-by-step.

The FREEandCLEAR Mortgage Expert

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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 falling back last week, the mortgage application index returned to positive territory for the week ended April 17th, continuing a strong run of mortgage activity over the course of March and April.  Home purchase mortgage applications increased 5.0% for the week after declining 3.0% for the prior week.  The refinance applications index increased 1.0% for the week after decreasing 2.0% for the prior week.  The composite mortgage application index, which includes both home purchase mortgages and refinancings, increased 2.3%, reversing a 2.3% decline for the prior week.  Driven by low interest rates, mortgage application activity bounced back nicely and continues to trend positively.  Mortgage rates remained attractive as the average interest rate for conforming loans (mortgage amount less than $417,000) dropped to 3.83% as compared to 3.87% for the prior week.  (Source: Bloomberg)

What it Means for Mortgage Borrowers

It is positive to see mortgage application activity pick up after the slight drop-off last week.  Low interest rates and improving housing supply are pulling home buyers into the market.  Existing home owners are also tempted by low rates but refinancing mortgage application activity has lagged purchase application activity over the past several weeks. Existing homeowners can use our Mortgage Refinance Calculator to determine how much money they can potentially save by refinancing.  Prospective home buyers can use our Mortgage Selector Calculator to determine the mortgage amount and program that are right for them.  Whether you are refinancing or buying a home, use our INTEREST RATES function to keep track of interest rates and fees 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 April 2015 showed that existing home sales in March spiked 6.1% on a month-over-month basis to an annualized 5.19 million units (so if you take the home sales figure for March and multiplied it by twelve), which came in at the top end of industry analyst expectations.  The March increase represented one of the biggest gains in the history of the existing home sales report.  On a year-over-year basis, existing home sales increased a whopping 10.4%.  The increase in sales was seen across all property types with multi-family property sales increasing 11.1% on a monthly basis and single family home sales increasing 5.5% on a monthly basis.  Additionally, sales increased across all geographies with the Midwest leading all regions with a 10.1% growth in sales.   March also saw a modest increase in inventory with annualized existing homes available for sale increasing to 2.0 million from 1.9 million in February.  The increase in home sales was greater than the increase in inventory causing inventory relative to sales to dip slightly to 4.6 months of available supply, down from 4.7 months of supply in February 2015.  The jump in demand led to an increase in prices with the median existing home sales price rising to $212,100, representing a 5.1% increase on a monthly basis and a 7.8% increase on a year-over-year basis.  The strong existing home sales report for March shows building momentum in the housing and mortgage markets.    (Source: Bloomberg)

What it Means for Mortgage Borrowers

The robust existing home sales report shows that home buyers are buying and mortgage lenders are lending.  Low interest rates and gradually growing housing supply are pulling home buyers into the market after several sluggish months.  Although price appreciation makes it harder for buyers to afford homes, an increase in prices should attract more sellers and bring more supply onto the market.  Continued low interest rates help to offset higher prices and make now a good time to start the home buying and mortgage processes.  Prospective buyers can use our Mortgage Selector Calculator to determine what size mortgage they can afford as well as the mortgage program that is right for them.  Additionally, use the INTEREST RATES function on FREEandCLEAR to review rates and fees for lenders in your area to find the mortgage that is right for you.

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 April 2015 showed lackluster results for March 2015 after a relatively sluggish report for February.  After declining 15.3% in February due to weather-related challenges, housing starts increased a meager 2.0% to approximately 926,000 annualized units.  The housing starts figure came in below expectations from industry analysts who were hoping for a rebound following the disappointing February report.  Housing starts gains in the Northeast and Midwest were overshadowed by declines in the West and the South, the largest U.S. housing market.  Housing permits also disappointed, declining 5.7% in March to 1.039 million annualized units, as compared to a 4.0% increase in February.  The permit figure also fell below analyst expectations.  In a disappointing sign for the housing market, low interest rates and improved weather failed to lift the Housing Starts report.  This contrasts with other recent market indicators such as the housing market index, new homes sales report and mortgage application index which all showed positive momentum for the mortgage and real estate markets. (Source: Bloomberg)

What it Means for Mortgage Borrowers

As noted above, the Housing Starts report is somewhat of an outlier as compared to more positive recent reports for other mortgage market indicators.  If the Housing Starts report continues to lag, this could result in lower housing supply for potential home buyers.  It is too earlier to jump to conclusions and other market reports suggest that buyers are able to find attractively priced homes and arrange mortgage financing.  Interest rates remain low and nationwide home prices remain relatively steady meaning that now continues to be a good time to get a mortgage and buy a home.  Use the Mortgage Selector Calculator on FREEandCLEAR to determine the what size mortgage you can afford and the mortgage program that is right for you. You can also use our INTEREST RATES function to compare rates and fees for lenders in your area to find the mortgage that is right for you.

The FREEandCLEAR Mortgage Expert

www.freeandclear.com