Mortgage Applications See Slight Uptick as Rates Remain Unchanged
This article was originally published on ETFTrends.com.
Mortgage applications saw a slight uptick last week, increasing by 13.5 percent--its highest level since February 2018--according to data provided by the Mortgage Bankers Association.
The association’s Market Composite Index increased 45 percent while the number of existing homeowner refinances increased 19 percent from the previous week--also its highest level since March 2018.
Furthermore, the association’s seasonally adjusted Purchase Index rose 9 percent from the previous week to its highest level since April 2010. The unadjusted Purchase Index increased 43 percent compared with the previous week and was 11 percent higher than the same week one year ago.
It's certainly welcome news for the housing market. A combination of rising interest rates and low home affordability dented the housing market for much of 2018.
However, investors are fretting over global growth after a volatile end to 2018. As such, a Federal Reserve that hiked interest rates four times last year is sounding more dovish for 2019.
The capital markets are now expecting a rate pause at some point in 2019, which could help boost the number of prospective homeowners or existing homeowners wishing to refinance their current mortgages.
“Uncertainty regarding the government shutdown, slowing global growth, Brexit, a more patient Fed, and a volatile stock market continued to keep rates from increasing,” said Mike Fratantoni, MBA senior vice president and chief economist.
Just last month, the National Association of Home Builders/Wells Fargo Housing Market Index hit a three-year low.
However, builder confidence rebounded as the index went up to 58 in January compared to the 56 reading in December. Furthermore, the central bank has been sounding increasingly dovish as of late, which could mean that less rate hikes than anticipated for 2019–something that could help give the sector a much-needed boost.
In the meantime, rental prices for single-family homes increased 2.9 percent annually in November 2018, which is up from the 2.8 percent annual growth compared to a year ago.
“Long-term rent increases have been lower than long-term home price increases,” said Molly Boesel, principal economist at CoreLogic. “For example, rent prices increased 17 percent over the past five years, compared with a 32 percent increase in home prices over the same period. Additionally, lower-priced rentals and homes increase 1 ½ to 2 times faster than higher-priced rentals and homes.”
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