Although employment gains were smaller than expected in August, indicating a lull in economic growth, this may set the stage for an active housing market in of 2013.
The slow recovery has a number of negative implications, but it has kept property values affordable and interest rates low, Mortgage Bankers Association vice president of research Michael Fratantoni told HousingWire. This could lead to an influx of purchase activity in the near future, especially among first-time homebuyers.
So far this year, a limited supply of properties has hindered transaction rates in many areas, but as prices continue to appreciate, rising prices could give current owners more incentive to put their homes on the market.
The presence of first-time homebuyers also declined following the expiration of certain tax credits in 2010 that made purchasing property advantageous, Fratantoni added. Once these incentives were no longer applicable, many buyers opted to wait on the sidelines with the hopes that they may return in the future. However, as these individuals come to terms with the fact that this may not the case, they are once again drifting back to the housing market.
Mortgage activity increases
Additional homebuying may actually occur sooner than expected. During the week ending September 7, overall mortgage application activity increased 11.1 percent from the previous period, according to a report from the MBA.
Mortgage records from the industry group indicate that the seasonally adjusted Purchase Index spiked 8 percent from the previous week and 7 percent from a year earlier. Meanwhile, refinance requests increased 12 percent, bringing the overall share to 80 percent of activity, which was a slight increase from a previous share of 79 percent, the report said.
Interest rates more affordable
A recent survey conducted by Fannie Mae found that many households expect mortgage rates to increase significantly during the next 12 months. This may have contributed to the surge in activity, as borrowers move to capitalize while fixed rates are still affordable.
Last week, the average rate for a 30-year FRM with a conforming loan balance fell to 3.75 percent, from 3.78 percent, the MBA reports. In addition, fixed-rate mortgages with jumbo balances averaged 4 percent, which was a decline from 4.05 percent.