Rates Slip While Mortgage Applications Inch Up​ – NMP Skip to main content

Rates Slip While Mortgage Applications Inch Up​

Phil Hall
Jan 12, 2017

For the second consecutive week, Freddie Mac’s Primary Mortgage Market Survey has found average mortgage rates on the decline.
The 30-year fixed-rate mortgage averaged 4.12 for the week ending January 12, down from last week when it averaged 4.20 percent, while the 15-year FRM this week averaged 3.37 percent, down from last week when it averaged 3.44 percent. The 5-year Treasury-indexed hybrid adjustable-rate mortgage averaged 3.23 percent this week, down from last week when it averaged 3.33 percent.
But while rates posted a drop, mortgage applications for new home purchases posted a two percent year-over-year increase last month, according to the Mortgage Bankers Association (MBA) Builder Applications Survey. On a monthly measurement, however, applications were down 14 percent from November to December. But Lynn Fisher, MBA’s vice president of research and economics, saw no reason to be concerned by this data.
“Mortgage applications for new single family homes increased on a year-over-year basis in every month of 2016, with December displaying the thinnest margin over 2015,” said  Fisher. “However, growth in applications set a high benchmark in December 2015, and it is not yet clear if the recent rise in interest rates is having an impact on applications for new homes. Looking forward to 2017, MBA continues to forecast more than 10 percent growth in single family housing starts.”
The MBA estimated new single-family home sales were running at a seasonally adjusted annual rate of 478,000 units in December, a decrease of 18.7 percent from the November pace of 588,000 units. On an unadjusted basis, the MBA estimates that there were 35,000 new home sales in December 2016, a decrease of 14.6 percent from 41,000 new home sales in November.
Separately, latest Arch MI Risk Index statistical model has concluded that the likelihood of home price declines across the United States over the next two years remains unchanged at four percent. On a state level, Wyoming, North Dakota, and Alaska were pegged as the three states with the greatest risk of home price declines while the Houston metro market was named the greatest risk for home price declines among the largest local housing environments.
“Housing is not in a bubble relative to incomes or monthly payments, either in a historical or international context,” said Ralph G. DeFranco, global chief economist for mortgage services of Greensboro, N.C.-based Arch Capital Services Inc. “Even as homeownership remains out of reach for many people, a growing housing shortage will continue to push up national home prices faster than inflation for the foreseeable future … While there are many negatives, ranging from weak wage growth to a near-tripling of student debt over the past 10 years, rapid price growth suggests the supply shortfall is more important. Given these positives for home prices, it isn’t surprising that our models give a very low chance that home prices could be lower in two years in the vast majority of cities across the country.”
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