According to the report released by the Mortgage Bankers Association, the entire mortgage application volume reduced by 1.7 percent last week but the volume’s value was 15 percent lower in the previous year. A reduction in the mortgage rates should have bolstered the mortgage business, but the reverse is the case in this scenario.
In this summer, dwindling affordability is a significant factor that has restricted the potential homebuyers, and this is affecting the mortgage market adversely. There was a decrease of the average contract interest rate for 30-year fixed mortgage rate with conforming loan balances of $453,100 or less from 4.81 percent to 4.78 percent, the lowest rate since the end of week which ended on July 20, with increasing points from 0.42 to 0.46 which also include the origination fee for loans with a 20 percent down payment.
According to Joel Kan, an MBA economist, he said that the treasury returns were significantly lower over the week, due to an FOMC release which states that Fed officials may be considering a more careful strategy to the final two anticipated rate increases of 2018. In the previous week, there was a three percent decrease in the applications to refinance a home loan, an application which is known to be sensitive to rates. However, the volume was 33 percent lower per annum, as the interest rates were noticeably lower in the previous year.
The home purchase mortgage applications also reduced by one percent for the week. The volume was three percent greater than the similar week last year but expected to be higher when the strong demand and improved economy are considered. The home price is the main issue in this aspect as most buyers cannot compete in most of the major markets, and they are withdrawing from the race. There is an increase in the prices of homes, but the speed has slackened in the last few months as some sellers stay on the market for an extended time. Despite that, the prices are not decreasing on a national scale, and there is no sign of diminishing in the presence of strong housing demand.
According to Aaron Terrazas, a senior economist at Zillow in an interview on CNBC’s “Power Lunch” on Tuesday, he said the appreciation of home value has reduced, but its present state is three times its historic pace and triple the wage growth’s rate. He also opined that it remains a seller’s market and will persist to be a seller’s market until there is an intense change in interest rates or inventory.
The mortgage rates are under severe burden in this week because the return on the ten-year US Treasury bond, which they slackly follow, is increasing again. In this summer, rates have moved within a narrow range, but they are exhibiting signs that they could start to soar higher.