WASHINGTON (2/13/14)--Mortgage market activity diminished slightly during the week ending Feb. 7, the Mortgage Bankers Association said Wednesday, after the group's chief economist warned that the recovery faces significant obstacles.
The most recent report shows that the MBA market composite index retreated by 2%. Its purchase index component fell by 5%, while its gauge of refinance applications dropped by 0.2%.
The slight downturn in demand came despite data showing key mortgage interest rates falling for the fifth consecutive week (Economy.com Feb. 12). An average of 30-year fixed-rate mortgages dropped by 2 basis points to 4.45%, while a measure of five-year adjustable-rate mortgages dropped by 4 basis points to 3.11%. The rate for a 30-year fixed-jumbo mortgage also fell by two basis points to 4.4%.
The 30-year fixed-rate conventional average is lower than it was four weeks ago, by 21 basis points, but higher on a year-over-year basis by 70 points. The five-year adjustable-rate average is also higher than it was a year ago, by 45 basis points.
Refinance activity for the week ending Feb. 7 accounted for 62% of all applications--a proportion that stagnated on a weekly basis--while the share of adjustable-rate mortgages increased to account for 8% of the industry total.
The most recent MBA measures show that mortgage demand has slightly improved over the past few weeks but remains relatively meager. A four-week moving average of refinance activity rose by 18.4% over the past four weeks, but is lower by 63% on a year-over-year basis. Purchase applications are 2.8% higher than they were a month ago, but 13.5% lower on an annual basis.
MBA Chief Economist and Senior Vice President Michael Fratantoni warned Tuesday that lackluster public sector hiring and various economic woes overseas are hindering the U.S. recovery. The MBA is predicting that annualized GDP growth will be at 2.3% in the first quarter, and 2.6% in the second quarter (Commercial Property Executive Feb. 11). It is also predicting that data will show GDP grew by an annualized 2.5% in the fourth quarter of 2013, after growing by 4.1% the previous quarter.
Moody's analysts intoned that the strength of mortgage demand is precarious. They cited National Association of Realtors data which showed that cash buyers made up 32% of existing home-sale transactions in December, while first-time buyers "accounted for only 27% of purchases." The analysts called application activity "lethargic" and pointed out that the MBA composite index is near its lowest level since 2001. Tight lending standards, they said, are partially to blame, with recent surveys showing banks increasing scrutiny of potential borrowers.