Mortgage applications have declined by 14.0% over the previous year, according to the Mortgage Bankers Association. Less refinance activity is primarily responsible for the drop. About one year ago (the week ending April 26), refinance applications took up a 75% share of mortgages. Today that number is 51%.
Refinance activity has declined partially because rates are higher. The average 30-year fixed mortgage rate is about 28.6% higher year-over-year, according to Freddie Mac, jumping from 3.43% to 4.41%. Central Coast Lending’s 30-year fixed rose from 3.326% to 4.349% – a 30.8% jump – for borrowers paying one point in cost.
Also over the past year, median home price rose 9.1% nationally, according to the National Association of Realtors (NAR). Over the first three months of 2014, the SLO County median jumped 18.3%, according to Keith Byrd.
As rates and prices have risen, the supply of homes on the market continues to hover around 5 months, according to the NAR. Six months is considered healthy.
So to recount, prices are higher, rates are higher, and supply continues to be slightly constrained. Will buyers see any relief?
One positive is that mortgage rates have been fairly steady over the previous 10 months. Most recently, they have dropped as U.S. stock markets have struggled. At the beginning of July last year, Freddie Mac reported the 30-year fixed average at 4.46%. Today, the average of 4.41% is slightly lower.
Another positive for buyers is that investors are scaling back activity. The top twenty investment firms buying California real estate have dropped purchases 70% since January of 2012. As sellers come back to the market, single-family buyers will have more opportunities to find a home.
Conditions remain beneficial for buying a home. Though rates are 1.0% higher, they are still on the low end of the historical spectrum. Even in their rise, SLO County’s median home price is still 17.4% off peak.
Mortgage rates will be in for more slight jumps as the Federal Reserve continues to reduce its bond-buying program called quantitative easing. Follow mortgage rate movement online: we give weekly mortgage rate updates for 10 loan programs on our website.
Need financing scenarios for a potential buyer or an open house? Central Coast Lending offers competitive pricing and mortgage solutions for the most hard-to-loan properties. Feel free to give us a call at 805.543.LOAN with any questions.