December is traditionally thought to be a tough month for the mortgage industry. Refinances decline because no one’s doing home improvements in the winter. Purchases decline because who wants to move during the holiday season? Numbers across the board slip into a decline, prepping themselves to take off in the first quarter. However last week told a different story.
According to the MBA’s seasonally adjusted index, total mortgage application volume rose 2 percent in comparison to last week. The main driver of this increase comes from refinance demand. Every week the rates at which a borrower can refinance at are subject to change under any slight pressure from either direction, and the reason for refinance reasons this close to the end of the year is the desire to save money on monthly payments and have the following months mortgage payment be deferred. For those who are looking for a little financial relief post-holidays, a refinance is certainly a viable option.
Home purchases rose 1 percent compared to the prior week. Home prices are still increasing and that’s a trend I don’t think will be reversing anytime soon. However, these prices are starting to increase at a slower rate than before. The average loan size on application dropped $15,000 from this time last year. Maybe these are signs that we’re getting closer to a threshold in which buyers aren’t willing (or able) to keep up with these aggressive price increases.
Back in October I spoke about how the volume of homes available for purchase along the west coast has skyrocketed. At the time, Oakland home availability was up 27%, Portland was up 28% and Seattle was up 42%. There are HUGE changes in what are supposed to be some of the hottest destinations for transplants in the entire country. Prices in these areas rose faster than almost anywhere else, and due to those large price increases over the past several years it seems home buyers have reached their tipping point. The juice (the location) seems it is not worth the squeeze (the cost).
If you’ve seen the 10-year, then you’ve seen it’s dipped below 3% for the first time since mid-September. Most of us weren’t expecting that so soon. But given the concerns over the growth of the global economy and the uncertainty of trade between countries with large GDPs…it makes sense that this is where we find ourselves. It’s a surprisingly good time for people who need a little relief in their rate and payments. How long this period will last – who knows! You know I’ll be watching, and I’ll keep you in the loop.
Until next week,
Peter
The opinions expressed in this post are the sole view of the writer and do not reflect the opinion of Princeton Mortgage Corporation.