• Seasonally adjusted applications to purchase homes fell 0.3% for the week ending September 19th, a sideways move from the prior week, but steady relative to a soft August. The purchase index is 15.6% lower than the same time period in 2013. Purchase application volumes have been weighed down this year by credit overlays, regulatory constriction and the high cash share of purchases.

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  • The average rate for a 30-year fixed rate mortgage as reported by the Mortgage Bankers Association rose to 4.39%, the highest level since the week ending May 9th. The average rate a year ago this week was 4.62%.
  • Conventional applications led this week’s decline, while applications through government programs rose. Both programs fell sharply in mid-July and muddled through August.
  • However, contracts for new home sales surged 18.0% in August relative to July. The strongest gains were in the West and Northeast, which jumped 50% and 29.2%, respectively, while the South rose 7.8% and the Midwest was flat. The summer moderation in rates combined with sustained interest in owning appears to be driving this trend.
  • New sales only account for roughly 11% of total sales, so the August contracts figure for new sales trend would have a muted impact on mortgage applications. However, the share of cash existing purchases fell from 29% to 23% from July to August, which would imply some lift to applications in July that may have reversed in August.
  • The median price for a new home under contract rose 8.0% over the 12-month period ending in August at $275,600. The median existing home price was 20.0% lower at $220,600, roughly double the historical average spread of 10.8%, suggesting that existing homes remain a bargain by historical standards.
  • This week’s reading suggests a solid improvement in new sales which will reduce inventories relative to demand heading into the fall. It also runs counter to stories of a disinterested or burdened consumer. Tight inventories of new homes will sustain price growth there and on the existing side, helping underwater owners, and boosting both buyer and seller confidence.