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First-Time Homebuyers on the Comeback?

Jan. 23, 2015--Sorohan, Mike msorohan@mba.org
The past month has seen interest rate drops back under 4 percent; a surge in mortgage applications, according to the Mortgage Bankers Association’s Weekly Mortgage Applications Survey; and now, an uptick in first-time homebuyer activity.

The latest Campbell/Inside Mortgage Finance HousingPulse Tracking Survey said first-time homebuyer activity, buoyed by low interest rates, started to increase much earlier than the typical seasonal home buying trend. First-time homebuyers accounted for 36.3 percent of home purchases in December, based on a three-month moving average. Market share for first-time homebuyers increased in December after four consecutive months of declines, including a share of 35.0 percent in November.

Tom Popik, research director for Campbell Surveys, noted that first-time homebuyer participation rebounded earlier than the seasonal pattern seen in previous years. “Market share for first-time homebuyers tends to decline throughout the winter and increase in the spring,” he said.

The survey said in 2014, the market share for first-time homebuyers topped out at 37.6 percent in July, the highest level seen since 2010. “If the typical boost in market share for first-time homebuyers continues through the spring, the first-time homebuyer share of home purchases in 2015 will surpass the elevated activity seen last year,” the report said.

MBA this week reports mortgage application volume increased last week to its highest level since June 2013, led by a 22 percent increase in refinance application volume, as 30-year fixed mortgage rates fell to its lowest level, 3.80 percent, since May 2013. MBA Chief Economist Mike Fratantoni said the recent reduction in FHA mortgage insurance premiums also played a role, noting FHA refinance applications increased 57 percent last week.

Popik said a number of factors could help continue to increase first-time homebuyer activity in 2015, including sustained low interest rates, reduced FHA premiums, introduction of low down payment programs from Fannie Mae and Freddie Mac and strong mortgage origination activity in the Veterans Administration program.

The report said time on market for non-distressed properties in December increased to an average of 10.3 weeks compared to 9.7 weeks a year ago. The sales-to-list price ratios on non-distressed properties in December fell by a larger amount than the more gradual decline seen at the end of 2013.

In a separate report, FNC, Oxford, Miss., said its Residential Price Index showed the nation’s average home prices were largely unchanged from October to November. This trend occurs after prices declined for the first time in September following two-and-a-half years of modest-to-strong price increases nationwide.

The report said weak housing activity, including sales of existing homes largely contributed to continued price weakness. The retreat in the annual rate of home price appreciation continues, down to 5.2 percent in November, compared to 7.9 percent in June. Year to year, average home price appreciation across the country dropped below 6 percent.

This morning, Black Knight Financial Services, Jacksonville, Fla., said its First Look report said mortgage delinquencies dropped by 7.2 percent in December after spiking in November, bringing the national delinquency rate back under 6 percent and down to 5.6 percent for the month and nearly 13 percent down from this time last year

The report said early stage delinquencies dropped by 220,000 from November; the number of loans 90 days or more delinquent decreased by 31,000. Prepayments jumped more than 25 percent from November, reaching its highest level since August 2013.

While the report said the inventory of loans in foreclosure continued its decline, ending December at 820,000, down nearly 35 percent from the end of 2013. Foreclosure starts, on the other hand, saw a 21 percent month-over-month increase, although starts were still down by nearly 15 percent from a year ago.