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- Seasonally adjusted applications to purchase homes rose 2.7% for the week ending April 4th, the 4th consecutive increase. The purchase index is 13.9% lower than the same time in 2013. Purchase applications appear to have bottomed relative to last year and are clawing their way back if only modestly.
- The average rate for a 30-year fixed rate mortgage as reported by the Mortgage Bankers Association was unchanged from the prior week at 4.56%. The average rate a year ago this week was 3.68%.
- A strong increase in applications for government financing, up 3.6% relative to last week, led the improvement, though applications for conventional financing rose for the 3rd consecutive week with an increase of 2.3%. The cost of FHA insurance remains high by recent standards, but it is the only option for most borrowers with low down payments and credit scores less than 700. The high cost of FHA mortgage insurance combined with the general rise in rates since last year is crimping affordability on this portion of the market…particularly first-time borrowers and some minority groups.
- This week’s reading suggests a very modest thaw in the weak year-over-year trend for purchase applications. The index improved for the 4th consecutive weak but remains anemic relative to last year’s strength which was driven by sub-3.5% rates. Strong price growth and higher rates since last spring impacted affordability. However, the strong trend last spring also muted the normal seasonal pattern, suggesting that part of the trend this spring is a restoration of the normal seasonal pattern. Sales and applications will continue to pick up as we move towards summer in the typical seasonal pattern, but may remain muted relative to last summer until credit overlays ease and mortgage insurance pricing improves.
