Home purchases are now dominating the mortgage industry, with home buyers buying homes as soon as they come on the market – making it harder to find a good deal on a home. March 2015 was the last time that refinance applications in the market were more prevalent than home purchases.
December 2016 pending Home Sales Index posted above its benchmark value of 100 for the 2nd straight month, according to the National Association of REALTORS®. A home sale is considered “pending” once it is under contract between a buyer and a seller.
Current mortgage rates are still low enough to attract home buyers. The National Association of REALTORS® (NAR) projects that home rises will rise another four percent in 2017. This comes after a healthy six percent increase in 2016.
With rent continuously increasing, renters are deciding to get into the home buying market before appreciation levels off. 2017 will be the year of the home buyers, according to an article on The Mortgage Reports.
According to mortgage origination software firm Ellie Mae, home purchase loans accounted for 54 percent of all loans that were closed in December 2016. Refinance now just makes up 46 percent of the market, compared to January 2013 when refinances made up 73 percent of the mortgage applications.
Based on nationwide average values, the average home buyer is “making” $14,000 per year in home appreciation. The figures are even higher in some areas though – for example, in Portland, Oregon a resident with a home value of $358,500 would have made over $46,000 in home appreciation in 2016. Buying a home is once again a great investment, according to an article on The Mortgage Reports.
Even home buyers with private mortgage insurance (PMI) are still yielding a return on their investment.
The Ellie Mae Origination Insight Report provides a look at today’s typical loan. For example, buyers with an FHA loan, on average, make a 4 percent down payment, and are getting approved with a lower credit score than last year. The average FICO score for an FHA buyer is 686.
Lenders aggressively lowered their credit score requirements in 2015, with some lenders now offering approval at a credit score of 580. Despite lenders being more flexible with credit scores, the credit scores of home buyers remain pretty steady.
With the uncertainty of the mortgage market ahead, it appears that the industry is leaning more towards purchases of homes right now, despite the lack of homes available to purchase.