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Mortgage affordability becoming a little more favorable once again

April 20, 2017

The past few months have seen some serious ups and downs in the mortgage market that could have significantly affected purchase plans for thousands of people. But most recently, the trend in affordability has been toward a more favorable market overall, as rates keep declining just ahead of the spring buying season. Now, it may just be a question of how long those conditions last.

The average rate on a 30-year fixed-rate mortgage slipped to 4.22 percent in the week ending April 14, hitting the lowest level seen since November of last year, according to the latest Weekly Mortgage Applications Survey from the Mortgage Bankers Association. But despite that positive change that would reduce costs for buyers - potentially by a significant amount compared with what they would have paid even a month ago - the number of purchase applications filed nationwide actually fell, dropping 1.8 percent on a seasonally adjusted basis. It was also down 1 percent year-over-year.

"Mortgage rates hit the lowest level seen since November."

A change from March?
Meanwhile, the latest data from the MBA pertaining to the total number of new homes purchased in the previous month were extremely positive, indicating just how heavily the market is fluctuating these days. The MBA's Builder Application Survey showed that the number of purchase applications filed for newly built homes jumped 6.7 percent on an annual basis last month, and 23 percent from February.

This big increase may have something to do with the cost of these new homes falling, having dropped about $2,000 from February to March, the data showed. 

"The pick up from a fairly modest February showing suggests that developers are finding ways to bring new product on line to help supplement otherwise low inventories of existing homes for sale in the U.S.," said Lynn Fisher, MBA's Vice President of Research and Economics. "In contrast to the increasing trend in average loan size in our Weekly Application Survey which reports on applications for both new and existing homes, the average loan size for new homes in March from the Builder survey was unchanged from a year ago."

"Home prices are only likely to keep rising."

What comes next?
With this in mind, the latest outlook on the housing market as a whole shows that some of the same old problems are expected to linger for some time to come, according to Freddie Mac. Home prices are likely to keep rising thanks to the tight inventory and rising demand brought on by the start of the spring shopping season, and it's expected rates will start to rise again as well. Indeed, the number of homes currently up for sale is at the lowest point seen in the past 10 years, due in part to many current owners having mortgage rates so low that they don't want to give them up by selling.

With all this in mind, the sooner shoppers can get into the market, the more likely they will be to lock in the best possible combination of low prices and rates.




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