Economic reports released today show that activity in two sectors of the housing market dropped to its lowest levels in more than a year, providing some of the latest evidence that elevated mortgage rates and home prices may have slowed the pace of the real estate recovery.
For the week ending Feb. 14, a seasonally adjusted purchase index from the Mortgage Bankers Association hit its lowest level since September 2011, the trade group said today. On an unadjusted basis, demand for purchase loans for the week dropped 17 percent from the same week a year before.
Some trade groups and analysts have said that the unusually cold weather has contributed to weakening activity in the housing market.
“While we don’t want to dismiss out of hand the downbeat message of these measures of residential construction activity, we think that they largely reflect a correction from the sharp gain in starts in November and the recent unseasonably severe weather,” Capital Economics, an economic research firm, said in response to the report on housing starts.
The biggest impetus for the recent slump, however, may be substantial increases in both home prices and mortgage rates. The combination of both has pushed up the cost of financed homeownership by roughly a quarter from last year in more than 300 counties nationwide, according to a report data aggregator RealtyTrac is set to release tomorrow.
“Last year was a nice bounce-back year for the housing market, particularly home prices, but we cannot expect to see the patterns of 2013 repeat in 2014,” said RealtyTrac Vice President Daren Blomquist. “This year will be more of a reality check type of year as home prices and sales slow down to allow incomes and confidence to catch up.”
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