Mortgage Applications Down, But Housing Market Optimism Remains Strong

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The Federal Savings Bank informs readers on how the housing market is improving despite a recently negative data point.

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the government is looking to increase the number of home buyers in the market by making it easier for first-time home buyers to qualify for mortgages.

Although mortgage reports have been mixed in the beginning of the year, The Federal Savings Bank thinks consumer optimism and loosening lending standards could boost the housing market throughout the rest of the year. The number of mortgage applications declined 9.1 percent for the week ended Jan. 2 compared to the previous two weeks, according to the Mortgage Bankers Association.

The MBA survey indicated the seasonally adjusted Purchase Index dropped 5 percent from the two weeks prior. The most recent results include the New Year's Day holiday, which could have influenced the decrease in mortgage applications.

Positive outlook for growth
Although mortgage applications are down recently, other reports show the housing market will be healthy overall. Fannie Mae recently released its National Housing Survey for December 2014 and found that consumers have a positive outlook about the direction of the economy, which could eventually result in bolstering the housing market. The survey revealed consumers are optimistic about growth in the job market, which could contribute to increases in home purchases.

Doug Duncan, senior vice president and chief economist at Fannie Mae, said that home buyers might still have lingering concerns about the stability of the economy. He said that consumers want to be sure that they can afford to buy a house.

The Federal Savings Bank enthusiastically noted that while the December housing survey indicated home buyers are still cautious about moving forward in purchasing a home, consumers are more optimistic about their ability to obtain a mortgage, which is an important step to finally obtaining the homes they want.

"One notable result in the December survey is that the share of consumers believing that it would be easy to get a mortgage exceeds those saying it would be more difficult to get a mortgage by the widest amount in the survey's history," Duncan said in a statement.

Housing affordability could influence housing growth
With more consumers believing they can better qualify for a mortgage combined with other economic factors, the housing market has a good likelihood of bouncing back in 2015.

According to a release by credit rating agency Fitch Ratings, the government is looking to increase the number of home buyers in the market by making it easier for first-time home buyers to qualify for mortgages.

The rating agency cited actions by the Federal Housing Administration to lower mortgage insurance premiums and required down payments. The release also noted that the Federal Housing Finance Agency will reduce down payment minimums from 5 percent to 3 percent for Fannie Mae and Freddie Mac, which could further increase housing affordability, especially for first-time home buyers.

"None of the actions as currently disclosed will independently push the needle for housing, but cumulatively, they could have a relatively meaningful impact on home buyer psychology, pent-up demand and housing trends in 2015 and beyond," Fitch Ratings said.

As more consumers become optimistic about their ability to buy a home, they should consider the best mortgage rate for them to afford their payments as well as the lender they would like to work with for the life of the loan.

Since consumers will be searching for the right lender, contact the Federal Savings Bank, a veteran owned bank, to learn more about mortgages.

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