Mortgage application activity dipped lower during the week ending February 17, as more prospective buyers chose to wait for housing market condition to improve.
According to the Mortgage Bankers Association's Weekly Mortgage Applications Survey, application activity decreased 4.5 percent during the week, as the seasonally adjusted purchase index fell 2.9 percent.
Additionally, fewer current homeowners chose to refinance their mortgage during the week as the share of refinancing activity edged slightly lower to 80.1 percent. The previous week refinancing accounted for 81.1 percent of all application volume.
Meanwhile, the report indicated that 57.2 percent of all applications in January were for 30-year fixed-rate mortgages, while 24.4 percent were for 15-year FRMs. In addition, adjustable-rate mortgages only accounted for a 5.5 percent share.
A slight increase in interest rates could be held responsible for the decline in application activity. The report showed that the average contract interest rate for a 30-year FRM with a conforming loan balance of $417,550 or less inched higher to 4.09 percent, while the rate for a 30-year FRM jumbo loan was hiked to 4.32 percent.
While the number of prospective borrowers applying for home loans to purchase property dipped lower mid-February, a recent report from the National Association of Realtors found that existing-home sales rose significantly in January – marking the fourth consecutive month of gains.
"The uptrend in home sales is in line with all of the underlying fundamentals – pent-up household formation, record-low mortgage interest rates, bargain home prices, sustained job creation and rising rents," said NAR chief economist Lawrence Yun.
Existing-home sales, which includes single-family homes, townhouses, condominiums and co-ops, surged 4.3 percent last month to a seasonally adjusted sales rate of 4.57 million. In December the sales rate hovered at 4.38 million units.
As a result of the spike in the existing-home sales rate, the report found that the nation's home inventory fell 0.4 percent with roughly 2.31 million homes available for sale. This represents a 6.1-month supply at the current sales rate.
"The broad inventory condition can be described as moving into a rough balance, not favoring buyers or sellers," Yun said. "Foreclosure sales are moving swiftly with ready home buyers and investors competing in nearly all markets."
Regionally, the report indicated that existing-home sales in the Northeast jumped 3.1 percent in January on an annual basis, while sales in the Midwest rose 1 percent during the same period.
Additionally, existing-home sales in the South increased 3.4 percent, while the sales rate surged by 8.8 percent in the West from January 2011.
However, while the NAR indicated slight improvements in the housing market, a recent report from Freddie Mac claimed that the weak economy will continue to hinder a real estate market rebound until at least 2013.
"The U.S. economy continues to build on the momentum from the end of last year," said Freddie Mac vice president and chief economist Frank Nothaft. "Our outlook anticipates gradual, but steady, improvement in the economy and the housing market, supported by low interest rates and brightening job market prospects."
The report added that the Federal Reserve's recent announcement that the agency plans to keep mortgage loan rates low until at least 2014 will continue to add affordability for prospective homebuyers who were previously forced to wait on the sidelines. In addition, government-sponsored programs such as Home Affordable Refinance Program and Home Affordable Modification Program will give current homeowners refinancing options, which could help to cut down on the foreclosure rate across the country.
