Refinancers Act on Lower Mortgage Rates, Homebuyers Don't

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Refinancing
Alex Stojanov/Alamy
By Diana Olick | @diana_olick

More trouble in Ukraine led to more applications for U.S. mortgage refinances last week; it is all about interest rates.

As investors poured into the bond market and interest rates fell, mortgage rates followed suit. Total mortgage application volume increased 1.4 percent on-week last week, according to data from the Mortgage Bankers Association. Refinance applications were behind the surge, rising 3 percent on-week, on a seasonally adjusted basis. They are still off 31 percent from a year ago, despite the fact that rates are lower today than they were a year ago.

"Conventional refinance applications increased last week as mortgage rates dropped to their lowest level in over a month. However, the refinance index remains within the narrow range we have been in over the past year, as most borrowers have little incentive to refinance at this level of rates," said Michael Fratantoni, chief economist for MBA.

The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($417,000 or less) decreased to 4.29 percent from 4.35 percent, for 80 percent loan-to-value ratio loans. The average contract interest rate for 30-year fixed-rate mortgages with jumbo loan balances (greater than $417,000) decreased to 4.18 percent from 4.24 percent.

Mortgage applications to buy a home continue to weaken, down 0.4 percent from a week ago. These applications, which are vital to the recovery in single-family housing, are down 11 percent on-year. Behind the drop, a near 6 percent decline in applications for government mortgages, which include loans from the Department of Veterans Affairs and loans insured by the Federal Housing Administration. MBA could offer no explanation for the decline in government loan applications.

While all-cash buyers are still an inordinately large share of the market, that share is slowly waning. All-cash sales accounted for 37.9 percent of all sales of single-family homes and condos nationwide in the second quarter, down from a three-year high of 42.0 percent in the previous quarter but still up from 35.7 percent a year ago, according to RealtyTrac, a real estate sales and analytics company.

"This is a classic good news/bad news scenario for the housing market," said RealtyTrac's Daren Blomquist. "The good news is that fewer cash buyers should help loosen up inventory of homes for sale and reduce competitive bidding, giving first time homebuyers and other non-cash buyers more opportunities. The bad news is that some of those first time homebuyers and other non-cash buyers may already be priced out of the market thanks to the rapid run-up in home prices over the past two years in many areas."

Sales of existing homes have risen slightly over the past few months, although sales of newly built homes, which come at a premium to existing homes, saw a steep decline in June. July numbers for existing home sales will be released by the National Association of Realtors Thursday.

14 PHOTOS
House Rich: Neighborhoods With the Biggest Price Jumps
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Refinancers Act on Lower Mortgage Rates, Homebuyers Don't

Year-over-year gain: 21.5%

Median sale price, Jan. 2013: $224,450

Median sale price, Jan. 2014: $272,750

Residents enjoy hundreds of nearby hiking trails, as well as indoor culture at the Fine Arts Center and the Colorado Springs Philharmonic.

Year-over-year gain: 22%

Median sale price, Jan. 2013: $318,375

Median sale price, Jan. 2014: $388,500

This neighborhood, bounded by the Schuylkill River and 20th Street, and by South Street and Christian Street, was viewed as a slum in the 1970s, when Philadelphia's Redevelopment Authority took over abandoned properties.

Year-over-year gain: 24.2%

Median sale price, Jan. 2013: $516,450

Median sale price, Jan. 2014: $641,500

Magnolia covers 4 square miles, making it the second-largest Seattle neighborhood by area. It features a lighthouse built in 1881 and is home to Seattle's largest park, at 534 acres.

Year-over-year gain: 32.1%

Median sale price, Jan. 2013: $210,446

Median sale price, Jan. 2014: $277,898

Paradise Valley, in the heart of the Scottsdale-Phoenix area, gets an average 294 days of sunshine a year -- hence, the more than 200 golf courses.

Year-over-year gain: 32.2%

Median sale price, Jan. 2013: $344,750

Median sale price, Jan. 2014: $455,835

The Washington Post listed Sunset Hills among "the shortest commute" category of Virginia neighborhoods, with an average commute time of just over 21 minutes. And Dulles International Airport is about six miles away.

Year-over-year gain: 44.5%

Median sale price, Jan. 2013: $247,735

Median sale price, Jan. 2014: $357,900

This once-seedy area has become hot in recent years. It's packed with art galleries and chic retail shops, as well as new upscale bars and restaurants next to venerable family-owned cafeterias.

Year-over-year gain: 46.9%

Median sale price, Jan. 2013: $284,750

Median sale price, Jan. 2014: $418,250

Brighton, once the center of New England's cattle trade, is in the northwest corner of Boston, on the Charles River. The Brighton Branch Library is Boston's first renovated LEED Green Building. The Brighton Police station is shown here.

Year-over-year gain: 47.5%

Median sale price, Jan. 2013: $223,175

Median sale price, Jan. 2014: $329,100

South Loop joins a number of other once-blighted neighborhoods on this list that have been redeveloped and are now hot. The site of former rail yards, it was known for many years more for its vices (as in brothels, burlesques) than its residential virtues.

Year-over-year gain: 48.7%

Median sale price, Jan. 2013: $241,000

Median sale price, Jan. 2014: $358,450

Also: Fairgrounds, San Jose (41.4%); La Jolla, San Diego (40%); Woodland Hills, Los Angeles (37.5%); Southwest Anaheim, Anaheim (35.2%); Berryessa, San Jose (34.4%).

Newhall, the southernmost and oldest district of Santa Clarita, was the first permanent Anglo settlement in the valley. Ranches-turned-film studios dot the area, including the Melody Ranch, which was once owned by Gene Autry. The ranch hosts the annual Santa Clarita Cowboy Festival.

Year-over-year gain: 48.8%

Median sale price, Jan. 2013: $504,250

Median sale price, Jan. 2014: $750,275

This is the most affluent neighborhood in Charlotte; the median income is $79,737, according to Zillow. That compares with a median of $46,975 for Charlotte. A high point of the area is the Duke Mansion, built in 1915 by tobacco magnate James Buchanan Duke.

Year-over-year gain: 57.4%

Median sale price, Jan. 2013: $167,450

Median sale price, Jan. 2014: $263,615

People who live here, according to classifications Zillow uses to characterize residents, are likely to be: Corporate Climbers, Multi-lingual Urbanites or in a category called "Bright Lights, Big City," which Zillow uses to describe "singles ranging in age from the early 20s to mid-40s who have moved to an urban setting."

Year-over-year gain: 97.3%

Median sale price, Jan. 2013: $668,250

Median sale price, Jan. 2014: $1,318,301

New York City’s 92-acre planned community includes areas built on more than 3 million cubic yards of soil and rock, some of which was excavated during the construction of the World Trade Center.

Bloomberg ranked neighborhoods in U.S. cities based on the year-over-year increase in median home sale prices from January 2013 to January 2014. Percentage increases were based on Zillow calculations of median sale prices of all home types and calculated only for neighborhoods with at least 10 sales per month. Only neighborhoods with median home sale prices of at least $250,000 in January 2014 were included. Data were rounded.

Related real estate rankings:

Most Expensive Home Prices: U.S. Neighborhoods

Priced Out: Where Higher Rates Could Hurt Homebuyers The Most

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