Existing Home Sales, Mortgage Purchase Applications

Each day the Research staff takes a look at recently released economic indicators, addressing what these indicators mean for REALTORS® and their clients. Today’s update discusses existing home sales numbers and mortgage purchase applications.

• The existing home sales data for January was released earlier in the day.  In brief, sales were up, inventory down to nearly 7-year lows, while the median transacted price was still lower than one year ago.
• In separate data news, the weekly mortgage applications for home purchases declined in the past week, this time by 3 percent, according to the Mortgage Bankers Association.  Even with the decline, the movements in this data have been mostly sideways (neither a consistent rise nor fall) over the past 18 months.
• One has to be mindful that home sales closings and mortgage applications can diverge, because there is no data on actual approvals of those mortgage applications.  In addition, there has been a big increase in all-cash deals in the past 3 years.  A good one-third of home sale transactions have been all-cash, thereby completely bypassing the mortgage process.  Contrary to the sideways movement in mortgage purchase applications, there has been some lift in home sales in the past two months.
• Refinance applications also fell by 5 percent in the past week.  Mortgage brokers will encounter some upturn in refinance business over the next several months because of a new federal policy to help responsible homeowners tap into low rates even if the homeowner is underwater.  But refinance activity is expected to quickly dry up towards the end of the year and into 2013 because the long term interest rates, not directly controlled by the Federal Reserve, will likely rise.  Mortgage business by that time will be mainly from home purchase activity.