Good Indicator of Future Home Sales
According to CNBC.com, despite being a somewhat quiet week for interest rates, mortgage applications increased unexpectedly. The total application amount went up 4.9% week-to-week for the week ending November 14th. The week's results were adjusted for both seasonal trends and for the Veteran's Day holiday.
The increase was mostly pushed by applications to purchase a home, which is a turnaround from recent months. While refinance applications increased just one percent week to week, purchase applications rose 12% to the highest level since July. "Mortgage Banking association, (MBA) and other data are showing strength in the market for new homes, likely reflecting the boost from continued job growth in recent months," said Michael Fratantoni, chief economist for the MBA.
Mortgage applications are a good indicator of future home sales, as consumers must secure the loan before closing on a property. Home builder sentiment increased in November, with the builders stating an increase in buyer traffic, according to a report Tuesday from the National Association of Home Builders.
Home purchase applications are still 6% below year-ago levels, and they are 9% lower than they were four weeks ago, on a non-seasonally adjusted basis. "This is historically a volatile time of year for purchase applications, and MBA's seasonal adjustments made the difference," said Matthew Graham of Mortgage News Daily, stating that purchase applications were actually down 3 percent week to week unadjusted.
Whatever the adjustments or volatility, home purchase application volume is frail compared with historical norms. This smaller volume makes percentage move up and down bigger than they might be normally. This week's jump is certainly a welcome for the housing recovery, but this trend needs to continue long-term to make a difference.
The average contract interest rate for 30-year fixed-rate mortgages with loan balances ($417,000 or less) decreased to 4.18% from 4.19% last week, according to the MBA. This week rates are getting slightly lower, with some of the best borrowers now getting quotes around the three percent range again.