Did the Housing Market Ignore Government Shutdown?

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Despite interest rates falling to their lowest level in four months, mortgage applications in the United States remained steady last week. The first government shutdown in 16 years certainly didn’t help the housing market, but its effect was modest.

According to the Mortgage Bankers Association’s latest report, for the week ended October 18, loan applications decreased 0.6 percent on a seasonally adjusted basis from one week earlier — the 17th decline in 24 weeks. That followed a gain of 0.3 percent in the previous week. The figure includes both refinancing and home purchase demand and covers more than 75 percent of all domestic retail residential mortgage applications.

The industry group’s refinance index fell 1 percent from a week earlier. Overall, the refinance share of mortgage activity accounted for 65 percent of total applications, which is 1 percent lower from a week earlier and 8 percent above its lowest level since April 2010. The unadjusted purchase index fell 1 percent, representing the fourth consecutive week the index was below year-ago levels.

The average interest rate for a 30-year fixed-rate mortgage decreased from 4.46 percent to 4.39 percent, the lowest rate since June. The most recent average rate for a 15-year fixed-rate mortgage came in at 3.51 percent, compared to 3.53 percent the week before. Between the beginning of May and the end of June, the average interest rate for a 30-year fixed-rate mortgage surged from 3.59 percent to 4.68 percent but has since stabilized.

Although interest rates have been declining in recent months, housing affordability is low and expected to get worse due. “Affordability has fallen to a five-year low as home price increases easily outpaced income growth,” explained Lawrence Yun, the National Association of Realtors’ chief economist. “Expected rising mortgage interest rates will further lower affordability in upcoming months. Next month we may see some delays associated with the government shutdown.”

In morning trading, home improvement giants Lowe’s (NYSE:LOW) and Home Depot (NYSE:HD) fell slightly, while shares of PulteGroup (NYSE:PHM), Lennar (NYSE:LEN), and D.R. Horton (NYSE:DHI) all jumped about 1 percent.

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