Affordability has certainly been the watchword in the housing sector for some time now, as low rates and prices that had yet to regain pre-recession norms combined to keep buying historically beneficial. But in recent months, prices have continued to rise and there have been justified concerns about the potential for higher rates. That, in turn, seems to have led to a decline in buying activity across the U.S.
Indeed, sales of new single-family homes nationwide fell to a seasonally adjusted annual rate of about 609,000, marking a decline of about 7.6 percent from the revised rate observed for July, according to the latest data from the U.S. Census Bureau and U.S. Department of Housing and Urban Development. The good news is that even as activity declined on a monthly basis, the sales activity seen in August was still a massive improvement year-over-year, adding more than 20 percent to the same sales numbers seen a year earlier.
Why the recent decline?
The median home sales price for new single-family properties came to $284,000, in August, but the average price was much higher, at $353,600, the report said. That actually brought the median home price down significantly – from a little more than $300,000 on an annual basis – but created a minor rise (of a bit less than $5,000) for the average).
Meanwhile, the supply of homes for sale at the end of the month was about 235,000, constituting an inventory of 4.6 months at the current sales rate, the report said. In August 2015, there was a 5.2-month supply, and about 217,000 homes on the market, indicating that both construction and new home demand was on the rise in the year between these two periods.
Consumers still wary of shifting affordability
This data should come as little surprise to many in the mortgage industry, because consumers have grown a little more wary of rate changes in recent months and that has led to some serious ups and downs when it comes to home loan requests. In fact, there was a seasonally adjusted decline in application volume of 0.7 percent in the week ending Sept. 23, according to the latest Weekly Mortgage Applications Survey from the Mortgage Bankers Association.
This was led by a decline in refinance applications, which fell 2 percent while there was a 1 percent uptick in purchase requests, the MBA reported. As a consequence, the share of the mortgage market comprised of refinance requests came to 62.7 percent, down slightly from the previous week's 63.1 percent.
Interestingly, though, this change comes despite the fact that mortgage rates actually declined in that one-week period, falling for both 30- and 15-year fixed-rate mortgages, the report said. The former is heavily favored among buyers, while the latter is typically used to refinance existing mortgages.
With all this in mind, many consumers who may still be waiting on the sidelines of the market for more affordability to show up could be doing themselves a disservice. The general consensus among mortgage experts is that rates and prices alike will probably be on the rise over the next several months.
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