Economists' Outlook

Housing stats and analysis from NAR's research experts.

The Latest Mortgage Purchase Applications

  • There was a surge in the number of people filing for mortgages in the first week of June. Applications for a home purchase increased 9.3 percent from the prior week after adjusting for the normal seasonal patterns. Refinance activity jumped 11 percent.
  • There have been many anecdotal stories of consumers getting lender pre-approval letters but unwilling to formally file for mortgage applications because of limited and unexciting inventory selections. But the recent increases in inventory are evidently reviving consumer interests.
  • With builders constructing more homes and as home prices continue to increase, the overall inventory will be rising.
  • Despite the latest gain, there is much room for further improvement. Mortgage applications for home purchases are still down by 14 percent from a year ago. Good thing cash sales have been holding on at a remarkable one-third of transactions even as investors have steadily exited the market (no longer active buyers, though investors are not yet selling).
  • Mortgage filings for home purchases will be rising. More inventory and more jobs are good combinations to help that trend. Policy changes will also help more mortgages get approved. The regulator of Fannie and Freddie has strongly hinted at modestly dialing-down the underwriting standards from excessively tight conditions. There are likely to be changes to the 3% cap on underwriting fees that has been in place. Any price controls limit credit availability, so lifting the artificial cap will help more consumers obtain mortgages.
  • Mortgage lenders, however, will face challenging times ahead. The refinance business is already down by more than 50 percent from one year ago and will likely sink even further. That’s because mortgage rates will be rising. Expect the 30-year fixed rate mortgage to average around 5 percent by early next year from the current 4.2 percent. Aside from mortgages for home purchases, lenders should give greater focus to commercial real estate loans since the job recovery is helping reduce retail and office vacancy rates.

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