WASHINGTON (1/30/15)--The Federal Housing Finance Agency (FHFA) reported Thursday that the national average contract mortgage rate in December fell to 3.98% from 4% the prior month--yet another index to report that interest rates have dropped below 4%.
But the lower mortgage rates have yet to fuel a rise in home sales, as pending-home sales fell 3.7% in December, reversing November's positive gains and pushing sales back to their lowest levels since April, according to numbers from the National Association of Realtors.
The Census Bureau also reported Thursday that the homeownership rate dropped 1.2% in the fourth quarter to 64% on an annual basis.
"Demand from traditional homebuyers continues to be muted, according to both recent mortgage application data and mortgage origination volume data," said Brent Campbell, Moody's analyst (
Jan. 29). "Further, according to several indexes, house-price growth continues to slow, as the contribution from institutional investor demand is beginning to wane and traditional homebuyers who use credit have yet to pick up the slack."
All regions posted declines in pending-home sales in December, with the Northeast dropping 7.5%, the West falling 4.6% and the Midwest and South slipping 2.8% and 2.6% respectively.
While pending-home sales remain 6.1% higher than year-ago levels, analysts had expected a gain in sales nationwide, rather than a step back across the board.
One explanation could be the growing preference to rent instead of buy.
The rental vacancy rate fell in the fourth quarter by 1.2% to 7% on a year-over-year basis, and 0.4% on a quarterly basis. Further, the median asking rent for vacant units climbed annually to $766 per unit.
"As house prices keep the upward momentum and get closer to their fundamental values, owning a home becomes less affordable," said Jing Zhang, Moody's analyst (
Jan. 29). "Moreover, many households still lack the confidence to buy, and many have not recovered from the credit loss during the housing crisis, resulting in low-purchasing mortgage origination."
The average loan amount, meanwhile, climbed to $298,300 in December, up from $293,600 in November, according to the FHFA.
The average interest rate on conventional, 30-year fixed-rate mortgages of $417,000 or less was 4.19%, down from 4.24% in November. And the effective interest rate, which accounts for initial fees and charges over the life of the mortgage, dropped to 4.15% in December, from 4.16% in November.