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  • Guaranteed Rate Mortgage Trend Summary Shows Purchase Volume Rising, Buyers Returning to ARMs

    Guaranteed Rate, one of the ten largest retail mortgage lenders in the nation, released a summary of mortgage trend snapshots for the U.S. from its database of home loans as of the end of the second quarter of 2014.

    • -Despite overall volume being down due to the harsh winter and rise in interest rates, purchase volume still rose by nine percent in raw volume and 30 percent as a percentage of total volume (from 49% to 79%) over the second quarter of 2013, and purchase volume rose a whopping 66 percent in raw volume over the first quarter of 2014, underscoring the weather’s effects on the housing market in cold-climate locations like Chicago, Boston and New York.
    • -Adjustable rate mortgages (ARMs) continue to rebound in popularity. These products made up just nine percent of the total volume of Guaranteed Rate’s loans in the second quarter of 2013, but made up 16 percent of all loan volume in the second quarter of 2014. ARMs’ rapid rise in the share of the total volume indicates that home buyers are feeling more comfortable with this type of loan product after shying away from it in the wake of the financial crisis.
    • -Primary residence purchase loans rose by two percentage points over the same period in 2013, while investor activity dropped by a corresponding amount compared to a year ago. This likely reflects that rising housing prices and inventory shortages have increased competition and reduced low-cost investment opportunities.
    • -Housing prices continued their steady march upward, with the median purchase price rising by 10 percent over the second quarter of 2013, and by 6.8 percent over the first quarter of 2014. Real estate taxes continued their decline, however, with an average decrease of 2% recorded vs. the prior year.
    • -The 30-year fixed mortgage remained far and away the most popular loan product, with it accounting for 73% of total loan volume, which is unchanged from the same period in 2013. However, 15-year fixed loans dropped from 12% of overall loan volume in the second quarter of 2013 to 8% in the second quarter of 2014.

    Some other local mortgage trends captured in the Guaranteed Rate data:

    • -In Chicago, purchase volume rose to 82% of overall loan volume in the second quarter of 2014, a dramatic rise over the 53.5% percent of overall loan volume in the second quarter of 2013. ARMs rose from 11% of overall loan volume during the same period to 18% of overall during the second quarter of this year. Median home prices in the area rose by 11.4% year over year.
    • -In New York City metro area, purchase volume jumped from 45% of overall loan volume in the second quarter of 2013 to 74% for the same period in 2014. ARMs also rebounded strongly in popularity in the region, making up 25% of all loan volume in second quarter of 2014, compared to just 14% of loan volume for the second quarter of 2013. Median housing prices in the area increased by more than 14% year over year, which may have been a factor in the number of home buyers opting for ARMs.
    • -In Southern California (includes both Los Angeles and San Diego), purchase volume was just 36% of all loan activity in the second quarter of 2013 and rose to 59% of all loans in the same period in 2014. 30-year fixed loan volume dropped year over year from 82% of all loans to just 64% of all loans, while ARMs soared from just 6% of loan volume in the second quarter of 2013 to 27% of all loan volume in the same period of 2014. Refis have still remained a significant part of the mortgage market in Southern California, making up 41% of all loan volume in second quarter of 2014.
    • -In Boston, purchase volume rose to 80% of all loan volume in the second quarter of 2014, up from just 47% of total volume for the same period in 2013. ARMs also rose year over year, from 13% of all loans to 21%. Median home prices in the area rose nearly 16 percent compared to the same period a year ago. 
    Sep 12 2014