Fewer Mortgage Applications Despite Low Rates

The housing market in the US is becoming ever more stable while the mortgage rates are still close to their historic low despite the predictions of considerable increase in 2014. In this situation, the demand for housing is still low. During the traditionally busy spring house buying season the mortgage applications experience a downward trend despite the weekly fluctuations.

The mortgage applications fell by 8% in May 2014 compared to the previous month. The decrease is not particularly large but given that the level of applications has been lower than expected throughout the spring house buying season, it is significant. Slight weekly increases are common, but they are followed by drops which are typically greater in size. As a result, the total number of applications is decreasing at a steady pace.

The number of home sales is following the same trend and also dropped during May 2014. While 419,000 units were sold in April only 374,000 units were sold in May. This constitutes a 10.9% decrease in sales on a monthly basis. The larger decrease in sales can be explained with the fact that a considerable number of new mortgage applications are for refinance.

Refinance at
Loan Type

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The sales of new units experienced an even greater decrease during May 2014. During May only 36,000 new homes were sold compared to 42,000 in April. The monthly decrease is 14.3%.

The big question is why the mortgage applications and the home sales are falling while the mortgage rates are also decreasing and remaining close to their historic low. The tighter credit standards are among the major factors for the slowdown in the mortgage and housing markets. Fewer prospect home buyers are able to qualify for a loan. Many simply do not attempt making an application. The decreasing housing affordability due to the growing gap between home prices and income is also a major factor.

Mortgage rates are expected to keep their current level in the short term. At the same time, the credit standards are likely to remain tight while affordability will take more time to increase.

Mailynne

Mailynne

Mailynne serves as a content strategist and writer for mortgage.info. She is ahighly task-oriented strategic planner and experienced writer. Over the past 10 years, Mailynne has managedcontent for both large corporations, non-profits and businesses. She specializes in managing digital marketing,branding and web development content. Mailynne has worked with a variety of local, national and international organizations.

Contact: mailynne@mortgage.info
Mailynne

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