It turns out there is something that is spooking homebuyers considering there has been a 4.9 per cent decline in total mortgage applications over previous week.
According to Mortgage Bankers Association, the applications are now 8 per cent lower than the same week one year ago. Homebuyers have been rather busy for the entire year considering that applications have been flowing in at an increased rate throughout the year sans April, which was the weakest month. Volume fell 6 percent for the week and was barely 1 percent higher than a year ago.
Potential buyers might have been concerned about the Republican tax plan, which lowers the deduction for property taxes. The plan was getting a lot of attention last week, with news reports of how it could cause home values in high-cost states to drop.
Applications to refinance a home loan, which would not be impacted by the tax bill, also fell, down 3 percent for the week, despite lower interest rates. Refinance volume is usually highly rate-sensitive.
The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($424,100 or less) decreased to 4.16 percent from 4.20 percent, with points decreasing to 0.35 from 0.39 (including the origination fee) for 80 percent loan-to-value ratio loans.
Home sales have been suffering due to a lack of supply of affordable homes for sale. December is the slowest month of the year for the market, with few new sellers listing their properties. What is available has usually been sitting for a while. This year, that scenario is magnified because inventory was low to begin with.
While interest rates have been hovering at near-record lows for much of the fall, they did begin moving higher this week. The yield on the 10-year Treasury, which mortgage rates follow loosely, jumped more than 10 basis points in two days. The rate move, according to experts, was not a response to the expected passage of the tax bill.