The mortgage market is particularly strong today, following a month when home price appreciation slowed and interest rates remained low. Within the past week, mortgage applications soared nearly 12 percent compared to the prior week. That's despite continued concerns regarding TRID implementation that some worried would impact loan originations. Though it may take some consumers longer to receive their loans as lenders work through new processes, it's clear that demand remains strong and applications are being processed.
Price appreciation slows
One of the biggest limiting factors on homebuying has been restricted inventory that pushed home prices up in certain high-demand regions. While appreciation is still occurring, the most recent data indicates it has slowed down. According to the Federal Housing Financing Agency's research, the home price index rose just 0.3 percent in August, a significant decline from the 0.5 percent jump seen in July. This prompted the agency to adjust its overall forecast for annual home price index appreciation downward from 6 percent for 2015 to 5.5 percent.
While prices are up overall for the year in every region of the country, some areas experienced negative price growth, which has decreased the national average for appreciation. Prices dipped in the Mid-Atlantic and East North Central regions during the past month, but that was not enough to offset previous gains.
Lending requirements become less strict
Tight lending qualifications defined the years that followed the financial crisis, and foreclosures have fallen since stricter requirements went into effect. Now, requirements are set to loosen as banks seek to expand their market share and slowing price appreciation makes the market more hospitable for homebuying.
In a speech to the Exchequer Club, Thomas Curry, the Comptroller of the Currency said the Office of the Comptroller's research had found banks were taking on more loans in recent months, according to HousingWire. The increase in loan volume generally brings a commensurate increase in risk, but also has the potential to boost housing demand across the country. Despite loosening requirements, Curry noted that many organizations are still refusing to loan to potentially risky borrowers.
This means there is still a sizable chunk of the mortgage market that will turn to alternative lenders for financing. Particularly as the economy improves and home purchasing ticks up, alternative lending will continue to fill a void left by traditional lenders who are wary of working with near-miss borrowers.