The January surge of applications for new home purchases came with little surprise for Mike Fratantoni, the chief economist for the Mortgage Bankers Association. Fratantoni says the 35% increase from December “May appear to conflict with other data such as MBA’s purchase application index and NAR’s existing home sales data that point to a weak market for existing homes, and our Builder Application Survey (BAS) estimate is consistent with reports of homebuilder sentiment that show strength in the market for new homes and increases in Denver wholesale lending. It is also worth noting that the significant January increase also followed a particularly slow pace of sales in November and December.”
It is estimated by MBA that new homes sold at a seasonally adjusted rate of 543,000 units in January, which is a large increase compared to the 402,000 units in December. This represents a 26% spike over the course of one month. On an unadjusted basis, there were an estimated 38,000 new homes sold during January, which is an increase of 10,000 or 36% from the December 2013 estimate of 28,000 new homes. This information comes from MBA, which gets its figures using the mortgage application information provided from the BAS, as well as from factoring other assumptions.
MBA says that on an unadjusted basis that mortgage applications for new home purchases increased by 27% compared to the previous month. MBA also says that by loan type the breakdown is as follows:
69.4 percent conventional loans
15.9 percent FHA loans
13.4 percent VA loans
1.3 percent Rural Housing Service/ U.S. Department of Agriculture (RHS/USDA)
The average home loan price did however decrease from $300,444 in December 2013 to $289,358 in January of 2014. This may seem somewhat counter intuitive to the rest of the data, but this may have been caused from a number of reasons. One possible explanation is the horrific winter seen by much of the east coast, which slowed the building of new homes and increased the sale of existing homes. This factor may explain the drop in average price and increase in Denver wholesale lending.
With a spike like this for the month of January, purchase applications will likely even out through the rest of first quarter 2014. Most experts agree that it will slow down and we won’t see any more spikes like in January. Increasing interest rates will likely lower the demand for buyers entering the market, slowing new applications.
For those of you in the market for buying a house, it is advisable that you purchase now rather than waiting. Global economic expansion will put upward pressure on long-term interest rates making them climb slowly through the first quarter of 2014 and the rest of the year for Denver wholesale lending. Financially speaking, it would be best to lock in a low fixed rate mortgage while they are still low.
MBA tracks application volume with its Builder Application Survey. This information comes from mortgage subsidiaries of home builders from across the entire country. The Census Bureau publishes the official new home sales estimates on a monthly basis. All new home sales are recorded at the time of contract signing and will be reflected in their data.
For more housing industry trends and mortgage updates, stay tuned to DaveKevelighan.com or contact Dave at (303) 520-0004.
