Interest Rates Creep Up, a Big Decline in Foreclosures, and more: The Week in Housing

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This week we cover increasing interest rates, declining foreclosures, and get an update on mortgage applications.  We’ll also look ahead to next week’s busy week of housing data.

Rate Creep is Back

Thankfully for the housing market, rates have been relatively stable lately, rising only nominally.  However this week’s drift up in rates marks the 4th consecutive rise in interest rates.  Freddie Mac reported the 30-year fixed increased to 4.91% from 4.87% the prior week.  One month ago it stood at 4.76%.  The 15-year fixed moved up to 4.13% from 4.10% the prior week and is up from 3.97% one month ago.  Much of this week’s increase can be attributed to positive retail sales and consumer spending.

With a slowly improving economy, we can expect rates to rise.  Also inflation worries continue as 5 states now report $4 gasoline.  The Fed has already said we can expect rate hikes this year.  Many other countries are already increasing rates to keep inflation down.

Foreclosures Decline 15%!

This week RealtyTrac reported a big decline in foreclosures for the first quarter of 2011.  Foreclosure filings were down quarter-over-quarter 15% and down 35% year-over-year.  For the month March was up 7% over February.  There were 681,153 foreclosure filings in the first quarter of the year.  California led the way with 168,543 foreclosure filings, counting for 25% of the nation’s filings.  Florida, Arizona, Georgia, and Michigan rounded out the top 5.

Foreclosures are in decline foreshadowing the end of the housing crisis.  This end is still years out but these are good signs that inventory fundamentals are improving. Financing still is the biggest hindrance in a broader market recovery and we’ll likely see supply and demand fall be the reason the housing market recovers.

Mortgage Purchase Applications Drop

The Mortgage Bankers Association reported a broad drop in mortgage application activity for the week ending April 8, 2011.  The Market Composite Index dropped by 6.7% from the prior week, led by a decline in refinance activity (down 7.7%) and followed by purchase activity (down 4.7%).  The 4-week moving average for refinances is down 5.3% and up 0.7% for purchases.  Refinances dropped to a 60.3% share of the market.  At peak refinances were well over 80% of all mortgage applications.

Though we haven’t seen much in the way of significant improvement here, one would expect refinances to drop with rate increases.  I’m glad we’re seeing purchases make up more of the market here and ideally would like to see purchases over 50% of the market.  We should see more purchase activity as we get into prime home buying season.

Look Forward:

After a relatively quiet week in the housing market, we’ll look forward to the upcoming week for a sea of data.  We’ll see the FHFA Housing Price Index, builder confidence, housings starts, existing home sales from NAR, an interest rate update, and mortgage applications. This will be a busy week of housing data and we’ll get some idea if March was any better than the dismal start to the year (especially on the construction side).  We should see better existing home sales in the least.

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About Author

Ryan Hinricher is a Real Estate Entrepreneur, Blogger, Change Advocate and Founder of Investor Nation, a concierge realty and real estate investment company focused on the needs of the residential investment home community.

4 Comments

  1. Hey Ryan — In your opinion, is it possible the first quarter decrease in foreclosures is the result of lenders pushing the ‘pause’ button due to the courts’ mostly negative reaction to MERS shenanigans, ‘no standing’ findings, etc.?

    In other words, do you think we might see, maybe in the third quarter or so, the foreclosures banks didn’t instigate recently?

    • Jeff,

      Thanks for the question. I’d speculate to say that the pause doesn’t represent even 50% of the difference in the foreclosure decline. These pauses always seem overstated and the subsequent ‘flood’ when they resume never arrives.

      Foreclosures are still very high will be for some time, but at least these declines show that price declines will probably stemmed by year end.

      How do things look in San Diego?

  2. At the end of last year, I attended a presentation by a bank REO manager where he said “foreclosures will increase four fold in 2011″. The guy sitting next to me, a very active REO marketing specialist, leaned over and said “That’s what he told us last year – and my list of homes to sell dropped by 20%!”

    Now it appears as if 2011 is seeing another drop in REO’s, just like 2010 in spite of the bank’s predictions.

    Sooenr or later, these “upside down” homes will have to be dealt with – whether it is by restructuring of debt, foreclosure and resale, or bulk conversion to investment properties.

    You are wise to notice “interest rate creep”, but rates do that. Everybody has guess, and mine is that this is due more to short term sitations than long-term trends.

    The foreclosure inventory – and the possibility of new additions to it – is far more troubling to me.

  3. Jeff Brown

    A recent first hand report from a local agent says they’re up very significantly compared to 2010. I expect SD’s median price to be measurably less than end of year 2010. I’m in the minority on that locally. :)

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