TheMReport — News and strategies for the evolving mortgage marketplace.
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30 | Th e M Rep o RT o r i g i nat i o n s e r v i c i n g a na ly t i c s s e c o n da r y M a r k e t ORIGINATION the latest Purchase loans account for nearly 75% of Q3 Mortgages Although purchase share has risen, actual volumes remain low as first-time buyers struggle with housing costs and mortgage restrictions. t he share of mortgage loans used to purchase a home gained 10 percentage points in the third quarter when compared to last year, suggesting the last remnants of the refi boom have faded. According to a snapshot of mort- gage trends released in late October by Guaranteed Rate, purchase loans accounted for 73 percent of all mortgage volume last quarter, up from 63 percent a year prior. The increase came as refinancing num- bers dropped off by more than a third an- nually, "indicative of the fact that the third quarter of 2013 was when the mortgage market began to account for higher interest rates," Guaranteed Rate said. Refinance applications have yo-yoed in recent months, according to data from the Mortgage Bankers Association, even as mortgage interest rates have averaged below 4 percent. While purchase loan share has risen as a result, actual volumes remain low as entry-level homebuyers struggle with housing costs and mortgage restrictions. Among mortgage products, the 30-year fixed-rate mortgage remained the most popu- lar by a wide margin, comprising 75 percent of total loan volume in Q 3, up a percentage point from the same period in 2013. The 15-year fixed-rate loan lost ground, declining to an 8 percent share compared to 12 percent last year. Meanwhile, adjustable-rate products were mixed, gaining popularity over the year with a 13.2 percent share (compared to 10.7 percent last year) but tailing off from a share of 16 percent in Q2. "[T]he continued, steady year-over-year increase in the share of the total volume indicates that homebuyers are growing more and more comfortable with this op- tion," Guaranteed Rate said. In other findings, housing prices contin- ued on an upward trend, with the median purchase price climbing 8.1 percent over the year and 2.2 percent over the quarter. Average real estate taxes and credit scores were both essentially flat. Would-be homebuyers aren't the only group driven off by rising prices. Guaranteed Rate also found that invest- ment activity ticked down 1 percentage point over the year, "likely reflective of higher housing prices impacting deals available for real estate investors," the company said. Pending Home sales nudge Up September's increase is the first in nearly a year—evidence of a more buyer-friendly market. c ontracts for home sales improved annually in September, marking the first year-over-year increase so far in 2014. The National Association of Realtors' (NAR) Pending Home Sales Index, a forward-looking gauge of home sales based on contract signings, ticked up 0.3 percent to 105 from August's reading of 104.7, the group re- ported. Compared to a year ago, the index climbed 1 percent—the first yearly increase in 11 months. September was the fifth straight month in which the index remained above its bench- mark level of 100. Despite falling short of last year's levels, home sales in recent months have benefited from a more buyer-friendly market as inventory makes headway and price growth moderates. "Housing supply for existing homes was up in September 6 percent from a year ago, which is preventing prices from ris- ing at the accelerated clip seen earlier this year," said NAR's chief economist, Lawrence Yun. "Additionally, the current spectacularly low mortgage rates should help more buyers reach the market." Despite those improvements, the market still remains challeng- ing for some home shoppers, par- ticularly those in a lower-income bracket. According to NAR, 15 percent of Realtors who reported not closing a sale in September said their clients were unable to secure financing as tight credit conditions lock out all but the most pristine borrowers. With the recent finalization of a risk retention rule for the secondary market and the Federal Housing Finance Agency signaling its intent to make credit available to more Americans, the trade association ex- pects stringent lending requirements to become less of a concern. Pending sales figures were mixed around the country. According to NAR, contract sign- ings in the Northeast were up 1.2 percent in September, while sign- ings in the South rose 1.4 percent. Meanwhile, the Pending Home Sales Index for the Midwest was down 1.2 percent, and the index for the West slipped 0.8 percent.