While the new year is expected to provide prospective buyers of real estate affordable conditions, the latest Weekly Mortgage Applications Survey found that volumes fell from the week before even when accounting for the Martin Luther King holiday.
Data from the Mortgage Bankers Association for the week ending January 25 revealed that loan application volume declined by 8.1 percent on a seasonally adjusted basis, and the Market Composite Index also dropped 17 percent when not adjusted. While mortgage rates continue to offer affordability that hasn't been seen since before the housing market slump, the Purchase Index still slipped 2 percent over the week's time when adjusted and 6 percent when unadjusted. The index is, however, 2 percent higher than the PI the same week a year before.
Low rates have also generated an increased interest in refinancing, as applications for this process accounted for a majority of all activity throughout 2012 and continue to do so in the start of 2013. According to MBA's survey, the refinance share of mortgage activity fell from 82 percent recorded last week to 79 percent, and the Refinance Index dropped 10 percent from a week earlier.
Historically, fixed-rate mortgage have been more popular with both buyers and those refinancing, though the share of applications for adjustable-rate mortgages increased to 4 percent in the most recent weekly applications survey. This could be because average rates for FRMs increased the week ending January 24.
According to Freddie Mac's most recent Primary Mortgage Market Survey, the average rate for 30-year FRMs increased to 3.42 percent, the highest level seen since September 29. The average rate for 15-year FRMs was also higher from the week before, reaching 2.71 percent, but remained well below the 3.24 percent average from this time a year ago.
Additional information showed the average for 5-year ARMs stayed at 2.67 percent, matching the level recorded the previous week. The 1-year ARM also stayed at 2.57 percent.
Despite slight increases for FRM rates, averages are still much lower than those seen in recent months. Many economists have contributed slowed activity to an overall dormant time of year for transactions, though applications should rise come spring, when more homes are put on the market, helping to level out buyers demand and seller supply.