Despite a number of factors making the prospect of purchasing a home at an all-time high, mortgage application activity declined during the week ending March 16.
Mortgage volume decreased 7.4 percent during the week, marking the sixth consecutive week of decline, according to the most recent Mortgage Bankers Association's Weekly Application Survey. The report noted that a dip in refinancing requests was a major factor behind the decline.
"With the rate increase last week, refinances are obviously slowing, and the refinance share at 73 percent is down to its lowest level since last July," said MBA senior vice president of research and economics Jay Brinkmann. "With rate/term refinances falling as we go forward, Home Affordable Refinance Program will be a bigger percentage of refinances but will be more concentrated in certain states."
Meanwhile, the loan size for a home purchase increased to an average of $225,463 in February. At the beginning of 2012, the average loan size was recorded at $216,888. In addition, the average loan size of a refinance dipped to $222,048 during the month from $227,563 in January.
As a result of less application activity, the National Association of Realtors indicated that existing-home sales, including single-family homes, townhouses, condominiums and co-ops, fell 0.9 percent in February from the previous month. Despite the monthly decline, on an annual basis, existing-home sales were 8.8 percent higher. The sales rate of these homes is now aw an estimated 4.59 million units for 2012.
"The market is trending up unevenly, with record high consumer buying power and sustained job gains giving buyers the confidence they need to get into the market," said NAR chief economist Lawrence Yun. "Although relatively unusual, there will be rising demand for both rental space and homeownership this year. The great suppression in household formation during the past four years was unsustainable, and a pent-up demand could burst forth from the improving economy."
In an effort to further spur the rate of existing-home sales, the government recently implemented a pilot program that will make it easier for investors to purchase REO properties form Fannie Mae and Freddie Mac in bulk. By working through this distressed home inventory, it could result in less downward pressure on home prices, while cutting down on the vacancy rate in certain housing markets.
As a number of existing houses sit empty on the marketplace, builders constructed fewer new homes in February. A recent report from the Department of Commerce found that new home starts declined 1.1 percent in February from the previous month to a rate of roughly 689,000 units.
"Housing starts nudged down in February but from an upwardly revised January, leaving levels essentially as expected and the overall picture a little better. Higher permits point toward mild forward momentum," analysts from Econoday said in response to the report.
However, despite the month-over-month decline from the previous year, new home starts were up 34.7 percent. In February 2011, the rate hovered at 518,000 housing starts. This rise suggests significant gains in builder confidence and positive long-term buying trends during the past 12 months.
As affordable mortgage rates, bargain home prices and a strong national median household income continue to make the prospect of purchasing a home more affordable, buying a property in 2012 could be a profitable investment in a number of housing markets as the real estate industry continues to build momentum.
