Seasonally adjusted applications to purchase homes ticked upward 0.9% for the week ending March 28th, the 3rd consecutive increase. The purchase index is 17.3% lower than the same time in 2013. Purchase applications appear to have hit or are nearing a plateau in terms of decline from last year.
The average rate for a 30-year fixed rate mortgage as reported by the Mortgage Bankers Association was unchanged from the prior week at 4.56%. The average rate a year ago this week was 3.76%.
The bulk of the improvement came in the conventional space which rose 1.7% following a 4.0% increase in the prior week. Applications for government financing eased 1.1% following a modest 0.1% increase in the prior week. Recent announcements by some lenders suggest that credit overlays on the FHA program should ease, but that trend has not developed in the data, yet. Furthermore, the cost of FHA insurance remains high relative to private financing, but for those borrowers with high LTVs and credit scores less than 680. The high cost of FHA MI combined with the rise in rates is crimping affordability on this portion of the market…particularly first-time borrowers and some minority groups.
Purchase applications continue to stabilize, but remain well off of last year’s pace. Affordability has suffered over the last twelve months due to rising rates and prices. Sales and applications will pick up as we move towards summer in the typical seasonal pattern, but may remain muted relative to last summer until credit overlays ease and pricing improves.
Ken Fears is the Manager of Regional Economics and Housing Finance Policy. He focuses on regional and local market trends found in the Local Market Reports and the Market Watch Reports . He also writes on developments in the mortgage industry and foreclosures.