PHILADELPHIA – May 14, 2014 – 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."

Mark Vinter, managing director and senior economist for Wells Fargo Securities in Charlotte, N.C., is, however, expecting to see conditions improve in the second quarter, with more traditional buyers coming back to the market and the percentage of home purchases financed with mortgages increasing.

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.

"The rise in cash purchases appears to have been driven by a surge in overseas buyers and an increase in the proportion of retiree and second-home buyers purchasing homes with cash," Vinter said.

Realtors' chief economist Lawrence Yun said the findings "beg the question as to why we're seeing higher shares of cash purchases."

"Restrictive mortgage-lending standards are a factor, Yun said, "but the higher levels of cash sales may also come from the aging of the baby-boom generation, with more trade-down and retirement buyers paying cash with decades of equity accumulation."

Yet, BHHS Fox & Roach agent Kit Anstey, in West Chester, sees a different scenario. He said that buyers seem to have less cash because equity dropped substantially when the housing bubble burst.

Echoing what Zandi said, Anstey pointed out that some of these equity-poorer owners "are renting their home, not selling."

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.

Mortgages today "are not one-size-fits-all," he said. "Lenders must look at each buyer's unique financial situation on an individual basis before allowing or denying financing."

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.

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.

While agents here have had more than usual, it hasn't been overwhelming.

Copyright © 2014 The Philadelphia Inquirer, Alan J. Heavens. Distributed by MCT Information Services.

Reprinted with permission. Florida Realtors®. All rights reserved