Mortgage Applications Up, Home Sales Down
November 28, 2018
Although business activity during the week of Nov. 19 was truncated due to the Thanksgiving holiday, homebuyers were on the prowl for mortgages, according to new data from the Mortgage Bankers Association (MBA).
The Market Composite Index took a 5.5 percent upswing on a seasonally adjusted basis from one week earlier—although the unadjusted index went in the opposite direction for a 29 percent decline. The seasonally adjusted Purchase Index increased nine percent from one week earlier, but the unadjusted index fell by 28 percent—it was also two percent higher than the same week one year ago. The Refinance Index increased one percent from the previous week, but the refinance share of mortgage activity decreased to 37.9 percent of total applications from 38.5 percent the previous week.
Among the federal programs, the FHA share of total applications decreased to 9.6 percent from 10.7 percent the week prior and the VA share of total applications decreased to 9.9 percent from 10.6 percent while the USDA share of total applications remained unchanged at 0.7 percent.
“After several weeks of market volatility, 30-year fixed mortgage rates decreased four basis points to 5.12 percent last week,” said Mike Fratantoni, MBA’s Chief Economist. “Homebuyers responded, with purchase applications 1.7 percent higher than a year ago, and after adjusting for the Thanksgiving holiday, they increased almost nine percent from the previous week. The rise in purchase activity was led by conventional purchase applications, which surged almost 12 percent, while government purchases were essentially unchanged over the week. This also pushed the average loan size for purchase applications higher, which likely meant there were fewer first-time homebuyers in the market last week.”
Separately, the U.S. Census Bureau and Department of Housing and Urban Development reported that sales of new single-family houses in October were at a seasonally-adjusted annual rate of 544,000, down 8.9 percent from the revised September rate of 597,000 and down 12 percent from the October 2017 estimate of 618,000. The median sales price of new houses sold in October was $309,700 and the average sales price was $395,000. The seasonally-adjusted estimate of new houses for sale at the end of October was 336,000, which represents a supply of 7.4 months at the current sales rate.
Tian Liu, Genworth Mortgage Insurance Chief Economist, said, "The sharp increase in interest rates has led homebuyers to buy lower-priced homes. In fact, over the past few months, prices on higher-priced homes have fallen compared to the same period a year ago. Except for a few players, the construction industry is vulnerable to this shift as it has focused on building higher-priced homes since 2011.”
“New home sales fell in October and are running substantially behind last year's pace,” said MBA’s Frtatantoni. “However, the September number was revised up substantially. The hurricanes in the South and wildfires in the West likely impacted both month’s numbers, and continue to cloud the picture of the housing market’s overall strength. The strong job market and rising wages should continue to support housing demand, but the lack of affordability has been a major constraint this year. The increase in supply on the market will be a positive as we move into 2019.”
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