In May, home prices in ten states and the District of Columbia hit new peaks while interest rates remained below 4 percent. In general, the combination of these two factors are expected to fuel strong home purchasing activity. The rise in home prices is being attributed to low supply (CNBC, 7/7/2015):
“A complementary rise in the good-time-to-sell measure suggests that limited inventory, which is putting upward pressure on house prices, gives an increasing advantage to sellers,” said Doug Duncan, Fannie Mae’s chief economist. “Together, these results point to a healthier home purchase market, with more renters likely to find owning to be more cost effective than renting and more sellers likely to put their homes on the market.”
While the favorable patterns in home prices and interest rates suggest a healthy home purchasing environment, recently released data for June suggests other factors are stalling an otherwise expected boost in mortgage activity (CNBC, 7/7/2015):
“Despite recent signs of improvement in housing markets, mortgage credit availability stalled in June,” said Lynn Fisher, the association’s [Mortgage Bankers Association] vice president of research and economics. “Increases driven by higher availability of cash-out-refinance loans were more than offset by reduced availability of other types of loans this month, resulting in a decline in the index from May.”
The biggest tightening was seen in the most popular category—conventional loans, which are those backed by Fannie Mae and Freddie Mac. That could be due in part to lenders preparing for new regulations going into effect this fall.
The new regulations are intended to increase transparency in lending, but the data suggest lenders are being cautious in the conventional mortgage market.