WASHINGTON (4/24/14)--A day after the release of a disappointing existing-home sales report, the housing market took another hit Wednesday, as the U.S. Commerce Department said new-home sales plunged 14.5% in March, the slowest pace since July (MarketWatch April 23).
At a seasonally adjusted rate of 384,000 sales, three of the four U.S. regions experienced declines, a trend of weak housing demand that appears to be concerning to economists, who had forecasted a sales rate of 450,000 for March.
What's more, the Mortgage Bankers Association released its weekly mortgage applications survey Wednesday, revealing a composite index for mortgage applications that had fallen 3.3% for the week ending April 18.
Refinance activity has dropped by 10.4% over the past month and sits 70% lower than last year's levels, while purchase applications also fall 16.5% lower year-over year.
Moody's analysts don't envision purchase application demand to accelerate much in the short-term either.
"Up until (Wednesday's) report, new-home sales had been reasonably stable for six months following a soft patch last summer," Joshua Shapiro, MFR chief economist, told MarketWatch. "Mortgage applications for home purchase remain lower, suggesting that higher interest rates and earlier price increases are having an impact on individual demand for homes."
With a confidence interval of plus-or-minus 12.9% tied to the March new-home sales numbers, analysts caution taking too much stock in the reported numbers for just this one month, according to MarketWatch.
In addition to rising mortgage rates and the uptick in home prices, analysts attribute the sluggish housing market numbers to a tighter housing inventory and perhaps even lingering effects of the harsh winter weather.
Another explanation could be the hesitation by consumers to even attempt to enter the housing market.
According to a survey from loanDepot, an Irvine, Calif.-based lender, 53% "would-be borrowers" said securing a loan today is more difficult than it was a year ago (National Mortgage News April 22).
That despite the fact that the approval rate for mortgage applications climbed over 55% last year.
Further, 56% of consumers who want to buy a home won't even check whether they would qualify for loans because they fear rejection, according to the survey.
Lenders have eased credit score requirements needed to secure a loan, but consumers largely haven't taken notice, according to the National Mortgage News story. Half of the more than 1,000 consumers polled "lack knowledge of what minimum credit score lenders generally require for most loans," and 40% of those interested in buying homes opted to forego the purchase entirely because they lacked that knowledge.