Recent events and changes made by Fannie Mae and Freddie Mac as well as the low mortgage rates have resulted in the new home purchase applications increasing by 8% in October. The Mortgage Bankers Association has revealed important survey data which shows this considerable increase while experts are trying to figure out what caused it.
Increases compared to the previous month
The Mortgage Bankers Association application survey has estimated that new home purchase applications have increased by 8.5 percent in October over the previous month. The increased number of applications has largely been connected with higher priced properties. The Mortgage Bankers Association has also estimated that single family home sales had seasonally adjusted annual rates hovering at around 461,000 units in October. According to the Washington-based bankers association, adjusted annual rates were of 425,000 units the previous month, signaling a 36,000 unit increase.
According to the same data set obtained by the Mortgage Bankers Association, 68.2 percent of all applications were conventional loans. The Federal Housing Finance Administration loans composed 16.2 percent of all the loans. Veteran Affairs loans accounted for 14.2 percent of all the requests while USDA represented just 1.5 percent of all loans.
The average size of loans on new home purchases also increased in October compared to the previous month. If in September, the average loan size was of 298,274 dollars, in October, the new home prices have increased to 300,289 dollars. These new home sales estimates are obtained from deriving market coverage assumptions while also being based on information supported by the Mortgage Bankers Association regarding mortgage applications nationwide, data present in their latest application survey where they also tracked application volume from home builders on a national level.
Possible causes of the increase
While opinions are split, it is clear that more and more people are purchasing homes at the end of this year. The increases in October new home purchase applications are mostly associated with higher priced homes, a thing which is most likely supported by the low mortgage rates. Unfortunately, these lows that haven’t been seen in the past year are not very helpful with entry level home buyers due to the strict mortgage standards still in place, where potential borrowers with less than perfect credit scores cannot qualify.
However, this is most likely to change due to Fannie Mae’s announcement regarding the plan to bring back mortgage down payments of 3 percent instead of the 5 percent that are in place now. There are also other measures taken by the Federal Housing Finance Administration and Fannie Mae which it regulates to ease mortgage standards as to allow a broader range of home loan borrowers to have access to loans. This will open up the home market for entry level borrowers as well, where lower credit scores will be less of a problem, especially since Fannie Mae and Freddie Mac will also not force lenders to buy back bad loans in certain cases, such as when the information provided by the borrower is not accurate.