From the Philly Inquirer:
Applications for mortgages to buy houses have been lagging so far this year – 16 percent below the pace for 2013.
Yet, for the first time since 2009, applications to purchase are exceeding deals to refinance mortgages.
The lower numbers for home-buying mortgages reflect continued weakness in the real estate market, even though the 30-year fixed rate fell Thursday to 4.21 percent – its low for the year so far.
There are many reasons, according to economist Mark Zandi, chief economist of Moody’s Analytics in West Chester.
Refinancing activity has dried up with higher mortgage rates, he said, and lending standards are tight, especially for first-time buyers.
“There is sticker shock due to a combination of higher rates and house prices,” as well as “underlying reticence to purchase a home, given the housing bust,” Zandi said, as evidenced by single-family rental being “real competition to buyers.”
Data from at least two sources, and some anecdotal evidence, show an increase in the number of all-cash, non-investor buyers in the first quarter of 2014.
There have always been cash purchases in the higher-end housing market.
Toll Bros. CEO Douglas V. Yearley Jr. said just that in a meeting last week in New York when asked about the effects tighter lending was having on the luxury-home builder.
Yearley said 20 percent of the Horsham-based company’s buyers are all cash, while those who take out mortgages put down 30 percent.
Guy A. Matteo, an agent with Re/Max Preferred in Newtown Square, agreed, saying that all-cash buyers comprise “a small percentage of my overall business – mostly higher end.”
Tighter credit requirements haven’t helped, said Jerome Scarpello, of Leo Mortgage in Ambler.
“Lenders have been told that if a borrower’s debt-to-income is over 43 percent, they lend at their own risk and do not have the safe-harbor protections of the agencies,” Scarpello said.
There is a misconception among many first-time home buyers that they will not qualify for financing under the new credit guidelines, which is not the case, said Malcolm Hollensteiner, director of retail lending sales and production at TD Bank.
One reason for the sluggish real estate market most often mention by Philadelphia-area agents and brokers is the shortage of inventory, which Zandi attributes to “a disconnect between potential buyers and sellers and the appropriate price.”
All-cash, then, might be a negotiating tool in some cases.
Martin Millner, of Coldwell Banker Hearthside in Yardley, said a listing in Lower Makefield, priced around $470,000, “generated multiple offers, and the buyer we contracted with is paying cash.”
RealtyTrac reported that, nationally, 42.7 percent of first-quarter sales were all-cash, compared with 19.1 percent in the same period a year ago, with Pennsylvania at 42.1 percent versus 21.8 percent in 2013, and New Jersey 40.6 percent versus 19.1 percent.