Consumers Not Optimistic about Housing Despite Lower Mortgage Rates

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In the final week of August 2014, the average interest rate on a 30-year fixed mortgage loan reached 4.25% according to the Mortgage Bankers Association. It went down from 4.28% during the previous week. This was its lowest level since June 2013.

Despite the lower mortgage rates, the applications for home purchase loans fell by 2% during the final week of August. They are nearly 12% down compared to the same week of 2013 even though at this time the mortgage rates were significantly higher. Back then the average interest rate on a 30-year fixed mortgage maintained a level of 4.57%.

The low volume of mortgage applications coincides with a lower share of consumers who think that now is a good time to buy a home. According to the National Housing Survey for August which is carried out by Fannie Mae, only 64% of the participants believe that now is a good time to make a home purchase. This is the lowest share of optimistic consumers since the survey was first compiled. The share of optimistic consumers has been decreasing for two months now.

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In addition to the lower mortgage rates, housing affordability is improving compared to renting, according to a recent analysis carried out by Deutsche Bank. While both home prices and rental rates continue to increase, the former are rising at a slower rate compared to the latter. While housing affordability is improving, the access to credit remains tight. At a recent Goldman Sachs banking event, analysts noted that there was a 42% decline in the volume of home purchase money extended to home buyers with credit score between 680 and 720 during the period from 2002 to 2013.

At present, the share of first time home buyers in the market is approximately 33%. Historically, it has been in the range from 40% to 50%.



Christian Calvin mortgage Christian is a contributing writer for He is a graduate from the University of Tennessee with a degree in Communications and a concentration in Broadcasting. Christian has served as vice-president for a privately-held company for more than 20 years. Additionally, he has also applied his writing and business knowledge to various websites with a focus on business and sports news . . . both of which are passions. Christian enjoys playing golf and spending time with his family and friends.


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