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Housing Inventories and Foreclosures Fall, Mortgage Rates Rise

The Exchange

The housing data keeps flowing and this week there are more signs yet that a recovery for housing is in play, but not all of the news is good for potential homebuyers.

After months of debate about the elusive housing bottom, one promising piece of the housing puzzle -- foreclosures have fallen to a five year low, according to data from RealtyTrac on Thursday. There were 531,576 foreclosure filings in the third quarter, down 5% from the second quarter and 13% year-over-year, the ninth-straight quarter with an annual decrease, according to RealtyTrac.

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That news followed a regional economic overview by the Federal Reserve that found broad based improvements in residential real estate. Most regions reported stronger housing markets helped boost economic growth.

Meanwhile, online real estate marketplace Zillow reported Thursday that inventory rates have dropped by 19.4% nationally, across all homes with inventory declining the most in higher-priced homes -- 22%. California had the highest rate of declines across all price tiers.

Perhaps most striking, the inventory of lower-priced homes for sale has plunged by 40% in California over the past year, according to Zillow's analysis of changes in home listings. Those are homes that are commonly sought by first-time buyers.

"First-time homebuyers are being squeezed out of the market by falling inventory and the rapid influx of investors looking to buy basic homes to rent out to the growing population of people who have recently been foreclosed upon," said Stan Humphries, Zillow chief economist. "Investors are paying in cash and can close sooner, which is more favorable to banks and homeowners looking to sell."

The Mortgage Bankers Association said Wednesday that mortgage application volume decreased by 1.2% last week. The decline was due primarily to a decrease in refinancings -- the refinancing portion of the index dropped 2% from the week prior, while the seasonally adjusted purchase index rose 2%.

Refinancings make up the bulk of mortgage activity -- 83% according to the Mortgage Bankers Association's most recent survey.

Mortgage rates reversed course last week after 7 weeks of declines. The 30-year fixed rate rose to 3.39% from 3.36%, and the 15 year fixed rate nudged up just slightly to 2.7% from 2.69%, according to mortgage giant Freddie Mac.

Rates have lingered near or at all-time lows for months. A year ago, the 30 and 15 year rates stood at 4.12% and 3.37%, respectively.  You can see the longterm trends in the chart below.

We asked readers yesterday where they stood in the housing process: The largest portion, 37% of respondents, said they were paying off their mortgage, while 30% said they were refinancing.

Are you trying to buy or sell a house? Do the data reflect what you're seeing in your area? Share your experiences in the comment section below.