Mortgage Applications Continue to Fall

Business Insider reports that mortgage applications, for the week ending November 9, 2013, fell 1.8%, on the heels of a 2.8% decline the week before. Also, the purchase index was down 1% for the week ending Nov. 9, compared to a drop of 5% the week prior. A similar trend was seen in the refinance market with that index dropping 2% during the week ending Nov. 9, a noticeably smaller decline than the 8% drop the week before.

According to Freddie Mac, an organization chartered by Congress in 1970 which is designed to provide liquidity in the mortgage markets by purchasing qualifying mortgages from lenders, the 30-year fixed mortgage rate remained relatively unchanged at 4.16% for the week ending, down from a recent two-year high of 4.58%. However, in the following week ending November 14, rates took a significant one-week jump to 4.35%. Rates across the US, by region, are very equitable. The highest rates are in the Southeast and North Central regions where the average rate is 4.38%, while the low rate is in the West at 4.32% The Southwest checks in at 4.36%, while the Northeast is equal to the national average at 4.35%.

According to the Mortgage Bankers Association (MBA), the recent uptick in interest rates is having a large impact on mortgage industry. As interest rates were peaking, the MBA saw refinancing activity drop by 20%, which was the lowest level in more than four years. As interest rates rise, the monthly interest paid by a borrower increases. In order to maintain the same monthly payment as with a lower priced mortgage, a borrower would have to either decrease the purchase price of the home they are looking to buy, or invest a large down payment.  The purchasing power of the borrower and interest rates have an inverse relationship. While a 4.58%, 30-year fixed rate mortgage may appear high to today’s borrowers, historically it is not. The Federal Reserve is currently purchasing billions in Treasury securities mortgage backed bonds each month. In May of this year, the Fed announced plans to start tapering these purchases back, as the economy was becoming more stabilized. It was after this announcement that interest rates began to rise.

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In a new survey released earlier this month, Coldwell Banker Home determined that the average listing price for a four-bedroom, two-bathroom home in the 1,900 markets and 52,000 listings reviewed was $301,444. The most costly state was California with 13 of the top 25 most expensive markets in the United States. Retirement states, Florida and Arizona often get a bad rap for being expensive when it comes to affordable housing. According to this study, not a single market in the top-25 most expensive markets in the United States were in either state. For example, in the Tampa market, the average listing was well below the national average at $232,748 while in Phoenix, it was just $267,580.

How do you feel about this topic? Do you think interest rates will continue to rise? Let us know!