The Housing Market Continues This Losing Streak

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The downtrend in mortgage applications continued for another week as they hit their worst level in two decades. In the latest update from the Mortgage Bankers Association, for the week ended February 21, applications for home loans plunged 8.5 percent on a seasonally adjusted basis from one week earlier. On an unadjusted basis, the index fell 7.5 percent.

There have only been a handful of increases over the past nine months with the housing market returning to a more sustainable pace. As the chart above shows, mortgage applications are at their worst level years. The Refinance Index also dropped 11 percent, while the Purchase Index declined 4 percent from the previous week. In fact, the Purchase Index is now at its lowest level since 1995. On an unadjusted basis, the Purchase Index was 15 percent below year-ago levels.

Housing bulls expecting the recent weakness to turnaround will need to wait at least a little longer. “Purchase applications were little changed on an unadjusted basis last week, but this is the time of a year we would expect a significant pickup in purchase activity, and we are not yet seeing it,” said Mike Fratantoni, MBA’s Chief Economist, in a press release.

Overall, the refinance share of mortgage activity accounted for 58 percent of total applications, the lowest shares since September 2013 and down from 62 percent a week earlier.

The average interest rate for a 30-year fixed-rate mortgage increased from 4.50 percent to 4.53 percent. Meanwhile, the average rate for a 15-year fixed-rate mortgage rose from 3.55 percent to 3.56 percent. In addition to higher rates, rising home prices have been an issue for affordability. The national median existing single-family home was $196,900 in the fourth-quarter, up 10.1 percent from $178,900 from a year earlier, according a recent report from the National Association of Realtors. In fact, 73 percent of measured markets showed gains, while 26 percent posted double-digit increases.

On the positive, the rapid increase in home prices appears to be slowing. “The S&P/Case-Shiller Home Price Index ended its best year since 2005,” says David M. Blitzer, Chair of the Index Committee at S&P Dow Jones Indices. “However, gains are slowing from month-to-month and the strongest part of the recovery in home values may be over. Year-over-year values for the two monthly Composites weakened and the quarterly National Index barely improved. The seasonally adjusted data also exhibit some softness and loss of momentum.”

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