There was a significant drop in mortgage application activity during the week ending February 17, according to the Mortgage Bankers Association.
Mortgage data compiled to make the industry group's Weekly Mortgage Application Survey found that application activity fell 4.5 percent during the week as current and prospective borrowers performed less refinancing and made fewer home purchases.
The report noted that the seasonally adjusted purchase index fell 2.9 percent from the previous week, while refinancing fell to an 80.1 percent share of all mortgage application activity. The prior week refinancing accounted for 81.1 percent of applications.
The MBA reported that 57.2 percent of all applications during January were for 30-year fixed-rate mortgages, while 24.4 percent were for 15-year FRMs. In addition, 5.5 percent were for adjustable-rate mortgages. Rates for these mortgage loans have been hovering near all-time lows for numerous weeks after an announcement from the Federal Reserve stated that they would remain affordable until at least 2014.
As a result, the contract interest rate for a 30-year FRM with a conforming loan balance of $417,500 or less edged higher to 4.09 from 4.08 percent the previous week. Meanwhile, the rate for a 30-year FRM jumbo loan also increased slightly to 4.32 percent from 4.3 percent a week prior.
While there were fewer borrowers applying for loans to purchase homes during the week ending February 17, a recent report from the National Association of Realtors indicated that there was an increase in existing-home sales in January.
According to the report, transactions on single-family homes, townhouses, condominiums and co-ops rose 4.3 percent to a seasonally adjusted rate of 4.57 million last month. As a result, the national housing inventory dipped 0.4 percent to approximately 2.31 million homes - representing a 6.1-month supply.
"The broad inventory condition can be described as moving into a rough balance, not favoring buyers or sellers," said NAR chief economist Lawrence Yun. "Foreclosure sales are moving swiftly with ready home buyers and investors competing in nearly all markets."
Additionally, as speculation regarding a government-sponsored program to convert real estate-owned properties into affordable rental units circulates through the capital, Yun noted that this measures may not be needed, as a number of prospective buyers who were previously forced to wait on the sidelines are reentering the marketplace on their own to take advantage of the affordable prices offered by foreclosed houses.