National home prices continued to fall in January. However, this did little to deter Americans from wanting to become homeowners.
According to the most recent Standard & Poor's/Case-Shiller Home Price Index, combined prices from the 10- and 20-city composites fell 0.8 percent on an annual basis. Individually, from the previous month, the 10-city composite reported a 3.9 percent decrease, while the 20-city composite saw prices dip 3.8 percent.
The only markets in the 20-city composite to record home price increases were Miami, Phoenix and Washington, D.C. Meanwhile, only one city reported no change to prices, while the remaining 16 saw home prices fall.
"Despite some positive economic signs, home prices continued to drop," said S&P index committee chairman David Blitzer. "The 10- and 20- city composites and eight cities – Atlanta, Chicago, Cleveland, Las Vegas, New York, Portland, Seattle and Tampa – made new lows. Detroit and Phoenix, two cities that have suffered massive price declines, plus Denver, saw increasing prices versus January 2011. The 10-city composite was down 3.9 percent and the 20-city was down 3.8 percent compared to January 2011."
Even as home prices gained affordability, mortgage application activity declined during the week ending March 23, according to the Mortgage Bankers Association's Weekly Application Survey. The report found that there was a 2.7 percent fall in activity, as fewer current homeowners chose to refinance their home loans into more affordable rates.
During the week, the refinance share of application activity fell for the sixth consecutive week to 71.9 from 73.4 percent a week earlier. This is the smallest the share has been since July 2011. Experts at the industry group say the decline is a result of fewer borrowers capitalizing on government initiatives, such as the Home Affordable Modification Program or the Home Affordable Refinance Program, to obtain more affordable mortgage loan rates.
Meanwhile, the MBA found that the interest rate for a 30-year fixed-rate mortgage with a conforming loan balance rose to 4.23 from 4.19 percent the previous week, while the rate for a 30-year FRM jumbo loan increased to 4.54 percent.
Despite the slight increase in mortgage rates, housing affordability still remains at an all-time high. In fact, a recent survey from Fannie Mae found that a number of current renters plan to make the transition to homeownership as soon as their personal finances improve. The survey indicated that two-thirds of current renters share this sentiment.
"In spite of the impact of the housing crisis on home values and homeownership rates across the country, Americans by and large still hope to become homeowners," said Fannie Mae vice president and chief economist Doug Duncan. "Some may not be financially positioned to own a home in the near future, but Americans may begin to revisit that aspiration as employment and household balance sheets improve over the coming years."
Additionally, the government-sponsored enterprise noted that when choosing where to purchase homes, buyers concentrate mostly on the school district the property is located in, as well as the safety of the neighborhood.
The survey also pointed out that prior to the housing market collapse, many Americans felt that buying a home was a safe investment. However, nowadays, borrowers understand that the return of the financial undertaking is no longer a sure thing.