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Mortgage rates increased slightly during the October 12 week after three consecutive weekly drops following the Federal Reserve's September FOMC monetary policy statement release. Freddie Mac's weekly Primary Mortgage Market Survey reported an increase in the average 30-year fixed-rate mortgage of 3 basis points. The week's increase followed three consecutive declines that dropped the average 30-year fixed-rate from 3.55 percent to 3.36 percent.

The 15-year average rate also regained 1 basis point after falling 16 basis points following the FOMC's MBS purchase announcement. The average 15-year fixed-rate reported by Freddie Mac for the week was 2.70 percent.

Mortgage applications reported by the Mortgage Bankers Association slowed for the week as rates slightly gained. According to the MBA's Weekly Mortgage Applications Survey, mortgage applications decreased 1.2 percent. The week's decline followed a 16.6 percent increase in mortgage applications from the previous week which led to a 2 percent increase in the MBA's Purchase Index reading.

Refinancings were also down, according to the MBA's Refinance Index which showed a 2 percent drop for the week reported.

Mortgage markets saw further signs of continued improvement during the October 12 week. Distressed real estate continued shrinking, according to RealtyTrac and CoreLogic which released foreclosure and shadow inventory reports during the week.

RealtyTrac's foreclosure report stated a decrease of 7 percent in foreclosure activity for the month of September. September U.S. foreclosure activity reached a five-year low at 180,427 properties. Total monthly foreclosure property activity was also 16 percent lower than September 2011.

CoreLogic's shadow inventory report also showed distressed real estate improvements. The report stated a shadow inventory of 2.30 million properties with seriously delinquent loans in July. The July 2012 shadow inventory total was 10.2 percent lower than July 2011's 2.56 million units.

The week's reports indicate the housing market recovery is likely to continue. Mortgage rates remain low for potential homebuyers. Selling prices have also been improving, evidenced by CoreLogic's Home Price Index which has increased on a monthly and annual basis for the past six months. Fewer market foreclosures and seriously delinquent properties should continue alleviating downward pricing pressure from distressed real estate, allowing for further selling price improvements.

Source: Mortgage Market Weekly Update: October 8 - 12, 2012