Home buying demands rise as coronavirus slowdown begins to thaw
With a growing number of states indicating In the last week as they move towards easing social distancing protocols put in place to prevent the spread of COVID-19, it looks like the real estate market may be starting to thaw.
In recent weeks, home purchase requests have declined sharply as people simply weren’t asking for a mortgage, either because they couldn’t go and see a home they might want to buy, or because they were could no longer afford it due to the impact of the coronavirus on the economy.
But this trend may be reversing, as new data from the Mortgage Bankers Association shows that home mortgage applications recently hit their highest level in nearly a month.
Beyond that, the largest states in the United States have all seen an increase in purchase requests, lending more credence to the idea that the market may be waking up.
The news in this week’s release is that requisitions, which are still recovering from a five-year low, rose 12% last week to the highest level in nearly a month. “said Joel Kan, associate vice president of economic and industrial forecasting at MBA.
“The 10 largest states have seen an increase in buying activity, potentially signaling the start of a resumption of the pandemic-delayed spring home buying season, as restrictions on coronavirus lockdowns are slowly easing in various markets, ”Kan added. “California and Washington continued to post an increase in buying activity, with New York registering a significant gain after declines in five of the past six weeks.”
Overall, mortgage application volume fell 3.3% in the week ending April 24, 2020, but the drop was limited to refinancing applications.
According to the MBA, the Composite Market Index, a measure of mortgage application volume, fell 3.3% on a seasonally adjusted basis from a week earlier.
The refinancing index fell 7% from the previous week, but was still 218% higher than the same week a year ago, a near-record interest rate product.
The seasonally adjusted purchasing index increased 12% from the previous week. The unadjusted buy index rose 13% from the previous week, but was 20% lower than the same week a year ago, although the comparison from April 2019 to April 2020 does not not exactly an apples-to-apples comparison.
Given the state of the economy over the past two months, a slight increase in home purchase requests is a positive sign, according to Kan.
“Contributing to the rise in purchase requests is that mortgage rates have fallen to a new all-time low in the MBA survey, with the 30-year fixed rate declining to 3.43%,” Kan said. “However, refinancing activity declined by 7%, as refinancing rates likely remained higher than those on purchase loans. Lenders are still working at full capacity in pipelines, and changes in the availability of credit for refinancing loans have also had an impact on rates. “
The decline in refi activity is also seen in the share of total mortgage applications, with the share of refis dropping from 75.4% in the previous week to 71.6% in this week’s report.
Here’s a more detailed breakdown of this week’s mortgage application data:
- The Federal Housing AdministrationThe share of mortgage applications rose to 10.5% from 10.3% the previous week.
- The Department of Veterans Affairs’ the share of requests increased from 13.8% to 13.3%.
- The Department of Agriculture the share of total claims increased from 0.4% to 0.5%.
- Mortgage interest rates for 30-year fixed-rate mortgages with compliant loan balances ($ 510,400 or less) fell to 3.43%, from 3.45% the previous week.
- The average contractual interest rate for 30-year fixed rate mortgages with jumbo loan balances (greater than $ 510,400) fell from 3.81% to 3.72%.
- The average contractual interest rate for 30-year fixed-rate mortgages guaranteed by the FHA fell from 3.33% to 3.39%.
- The average contractual interest rate for 15-year fixed rate mortgages fell from 3.03% to 2.98%.
- The average contractual interest rate of ARM 5/1 remained at 3.29%.
Note: All of the interest rates mentioned above were for loans with 80% loan-to-value ratio, which means the borrower had a 20% down payment.