The MReport Webcast: Thursday 12/4/2014

A setback in refinancing volumes weighed down on overall mortgage application volumes for November, even as interest rates continued to tick down. Based on weekly application data released by the Mortgage Bankers Association, macroeconomics firm Capital Economics calculated a 0.3 percent increase in mortgage applications last month. The uptick compares to a 10 percent surge in October. The slowdown in application activity came despite a decline in the average 30-year mortgage interest rate—which hit an 18-month low of 4.17 percent—and improved labor indicators.

According to the firm, November's results included a 0-point-2 percent decline in refinance applications, which had jumped 18 and a half percent only a month prior. That was offset by a modest 1.7 percent increase in applications for home purchases. Even with the increase, purchase applications still came up 10 percent short of where they were a year ago, suggesting that the market remains dependent on investors and cash buyers as mortgage-dependent shoppers stay on the sidelines.                                                  

While housing analysts and industry groups continue to point to an absence of first-time homebuyers as a major headwind to the market, a newly released indicator suggests the actual share of entry buyers in the last year may be much higher. According to a new index released Wednesday by the American Enterprise Institute's International Center on Housing Risk, an estimated 46 percent of mortgages made from October 2013 through October 2014 were for first-time homebuyers. The AEI's measurement goes against the popular thought shared by many commentators, who suggest would-be homebuyers at the entry level of the market are being turned away due to too-tight credit standards. While average FICO scores suggest lenders today are being choosier than they were during the housing bubble, the institute maintains that debt-to-income levels and loan-to-value ratios indicate a much looser credit environment than other reports might suggest.