As the markets continue to ride the proverbial roller coaster, housing data has managed to avoid such large swings and appears to be steadily chugging onward and upward; showing a clearer picture than the last few weeks. The Mortgage Bankers Association’s mortgage application activity index reflects refinancing and home purchase demand. It reported a 1.3% increase during the last week of August which comes off the heels of a 2.5% drop the week prior. Last week’s refinance index increased 2% from the week before.
This increase in mortgage applications could be due in part to the 30-year mortgage rate which dropped to 4.73% from its high earlier this year of 4.80%. The slight drop in interest rates has also encouraged current homeowners to refinance before rates go any higher, even though they are still very low. Some economists expect that as the fed begins to taper bond purchases, the housing recovery may in the long term slow and lose its momentum, meaning mortgage applications and home prices could top out. For now, it could encourage potential home buyers to get off the sidelines and get in the game before rates rise even more and before home prices tick even higher.
The monthly CoreLogic report indicates that home prices, including distressed homes, jumped 12.4% higher in July from a year ago (1.8% up from a month ago). This is the 17th month in a row for home prices to increase. “Looking ahead to the second half of the year, price growth is expected to slow as seasonal demand wanes and higher mortgage rates have a marginal impact on home purchase demand,” said Mark Fleming, chief economist for CoreLogic. This high number is also in part due to fewer distressed homes for sale. Home prices were up 11.4% excluding distressed home sales over the last year.
The current supply of properties for sale is tight, which is also helping to push home prices higher. Recently, home builders have slowed their pace of construction, not keeping pace with the demand for new homes, leading to lower inventory numbers. Demand for housing is supported by the recently reported mortgage application numbers. Some believe this situation won’t change much over the course of this next year. Recalling from Econ 101, tight supply and strong demand will push home prices up whether they are new builds or existing homes. The biggest threat to this bullish story in housing continues to be interest rates and how quickly they move up.
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Souces: http://www.corelogic.com/about-us/researchtrends/home-price-index-report.aspx