Expand Your Education with These Courses from
A Consumer Advocate Approach to Real Estate: Course 1.
Effective Presentation Skills for Sales Professionals: Skills for Sales Success: Part Five.
Bundle 1: CIPS Core Course (US Version).
Bundle 2: CIPS Elective Courses (Non-US Version).
Bundle 3: CIPS Institute (US Version).

Home Loans Fall Off as Sales Slow, Rates Rise

Have a comment on this article? Share on Facebook!

By Tim Logan

AA000047(MCT)—Fewer home sales and rising interest rates have led to the nation’s lowest level of mortgage lending in 14 years.

Just $235 billion in home loans were started in the first three months of the year, the lowest figure recorded in a quarter since 2000, according to data from trade publication Inside Mortgage Finance.

That’s down nearly a quarter from the end of 2013 and more than half from the same period last year, when the housing market was heating up. And it is lower even than the levels recorded during the worst of the housing crash.

The fall-off was particularly sharp for mortgage refinancing, which was hurt by higher interest rates after record lows last spring. The average 30-year fixed-rate mortgage surged to 4.3 percent, up from 3.3 percent last May. That’s still quite low by historic standards, but the run-up, after years of low rates, means there isn’t a lot of demand for refinancing now.

“We’ve had two or three mini re-fi waves over the course of the last few years,” says Joel Kan, a director of economic forecasting, noting that many borrowers had already locked in lower rates. “The incentive is not really there for a lot of borrowers to refinance again.”

Those refinance loans had grown to make up an outsized portion of the mortgage business, more than 70 percent of activity a year ago, says Guy Cecala, publisher of Inside Mortgage Finance.

And new buyers haven’t been picking up the slack. The rate of home sales has fallen three months in a row, according to the National Association of Realtors.

Much like the broader housing market, which has seen a brisk sales pace for higher-priced homes, larger mortgages are moving more quickly, Kan says. Activity is strong above the national “jumbo” loan level of $417,000 and up, he says. But that accounts for only about 15 to 20 percent of mortgages.

“The other 80 percent, those are down on a year-over-year basis, and they’ve been down for six months now,” he says.

Kan is one of several economists who see the longtime low interest rates as a factor in slower sales. Homeowners who refinanced into 3 percent rates two years ago are likely to pay a higher rate today if they were to sell their house and buy something bigger. That’s dampening sales in the “move-up” market and making it harder for entry-level homeowners to buy in.

“That slowdown in re-fi activity is really spilling over into the purchase market,” Kan says.

Still, there are signs of a pickup, especially in purchase loans.

Bank of America says its pipeline of purchase loans set to close in the next six weeks is up 28 percent.

Continue Reading 1 2

Have a comment on this article? Share on Facebook!

Join RISMedia on Twitter and Facebook to connect with us and share your thoughts on this and other topics.

Leave a Reply

Your email address will not be published. Required fields are marked *

You may use these HTML tags and attributes: <a href="" title=""> <abbr title=""> <acronym title=""> <b> <blockquote cite=""> <cite> <code> <del datetime=""> <em> <i> <q cite=""> <strike> <strong>

Copyright© 2016 RISMedia, The Leader in Real Estate Information Systems and Real Estate News. All Rights Reserved. This material may not be republished without permission from RISMedia.

Content on this website is copyrighted and may not be redistributed without express written permission from RISMedia. Access to RISMedia archives and thousands of articles like this, as well as consumer real estate videos, are available through RISMedia's REsource Licensed Content Solutions. Offering the industry’s most comprehensive and affordable content packages. Click here to learn more! http://resource.rismedia.com

Our Latest News >>