Homebuyers across the U.S. are eagerly searching for homes, but they are running into an unforgiving housing market. Affordability is the worst it has been in a decade and current housing demand dwarfs the number of available listings.
Weekly mortgage applications dropped 2.5% last week as many homebuyers faced the reality of this housing market. Exorbitant home prices, limited inventory, and fervent bidding wars are the norm.
- Mortgage applications dropped a seasonally adjusted 2.5% last week
- Home prices continue to grow at twice the rate of income growth
- FHA mortgages are increasing in volume, a popular choice among first-time buyers with lower credit scores
Mortgage applications dropped 2.5 percent last week, seasonally adjusted, according to the Mortgage Bankers Association. The weakness was driven entirely by a lack of buyers. Total volume was 12 percent lower than the same week one year ago.
Mortgage applications to purchase a home fell 5 percent for the week and were just 1 percent higher compared with a year ago. Home prices continue to rise at more than twice the rate of income growth, and bidding wars are the rule rather than the exception for entry-level homes. New buyers are clearly struggling, and that is apparent in the type of loans for which they are applying.
“The mix of business changed, with FHA purchase volume increasing as conventional and VA volume decreased,” noted Mike Fratantoni, chief economist at the MBA. “This indicates that more first-time buyers are entering the market, even as the market as a whole continues to be restricted by tight inventories of homes available for sale.”
FHA mortgages are government insured. They offer down payments as low as 3.5 percent but also require mortgage insurance, which adds to the monthly cost. FHA loans have long been the preference of first-time buyers, who may have lower credit scores.
View the original article at CNBC