According to housing market reports, there has been a recent increase in mortgage applications, while mortgage delinquencies are expected to decline during 2012. This forecast comes as potential homebuyers become more confident in the nation's housing market.
The most recent Mortgage Bankers Association Market Composite Index, which measures mortgage loan application volume, spiked 12.8 percent in the week ending December 2. Meanwhile, the Refinance Index rose 15.3 percent from the previous week and now makes up 76 percent of total loan applications.
"Coming out of the Thanksgiving holiday, applications increased significantly as mortgage rates dropped to their lowest levels in about two months," said MBA vice president of research and economics Michael Fratantoni. "In particular, refinance applications increased sharply, with some lenders seeing refinance volume double."
However, despite the promising increases, levels are still below activity recorded two weeks ago, added Fratantoni.
Mortgage rates continue to hover near historic lows and the MBA reported that 85.5 percent of applications for home purchases were for 30-year fixed-rate mortgages, while 6.8 percent were for 15-year FRMs. In addition, requests for adjustable-rate mortgages made up 5.9 percent – the second lowest ARM share since the beginning of 2011.
Meanwhile, among refinancing activity, 52.9 percent of applications requested a 30-year FRM, while 26.2 percent were for 15-year FRMs.
As more borrowers capitalize on affordable rates, a recent forecast anticipates mortgage delinquency rates to edge higher before declining in 2012.
The forecast from TransUnion predicts that mortgage delinquencies, of 60 days or more, will rise to roughly 6 percent by the end of 2011 before falling to 5 percent over the course of 2012.
"Although house prices and unemployment will likely face continued pressure next year, this forecast calls for gradual improvements in the second half of 2012 to other key variables, like improving credit quality of new originations, consumer confidence and GDP, that will positively influence homeowners' ability and willingness to pay their mortgages," said TransUnion vice president of U.S. housing Tim Martin.
Martin added that if there are no additional shock to the economy that would drastically affect the average borrower's financial situation, mortgage delinquencies could fall by as much as 16 percent in 2012 when compared to this year.
Meanwhile, TransUnion predicts that the largest fall in delinquency rates will occur in Arizona, Wisconsin and Colorado.
A decrease in delinquency would help bolster the overall climate of the nation's housing market. However, as the new year approaches, Fannie Mae has recently discovered a positive increase in consumer sentiment regarding home prices.
According to a survey by the mortgage giant, an increasing number of consumers believe that home prices will increase by at least 0.2 percentage points during 2012.
"Though their home price expectations have become slightly positive, consumers remain concerned about the direction of the economy and continue to view their household finances as being relatively flat," said Fannie Mae chief economist Doug Duncan.
Of the respondents questioned in the survey, 22 percent expected home prices to increase during the new year – a 3 percent increase from the previous month – while 53 percent predicted there would be no change at all. In contrast, 22 percent expect home prices to decline over the course of the year.
Meanwhile, 68 percent of those surveyed said that now is a good time to buy, while 33 percent forecast mortgage rates to increase in 2012 after hovering near record lows in recent months.
