4 Weeks of Positive Purchase Applications, Signaling the Spring Housing Market May Not Be a Total Loss
2020 Purchase Application Heat Months Tracker: 11% growth week to week and only down now 10% year over year.
This is the year over year data.
BC data (Before Coronavirus)
AD Data (After the Disease)
-35% (The peak % decline)
AD avg. -22.875%
As some states reopen from the nationwide coronavirus shutdown and open houses reemerge, buyers are coming back to the housing market much faster than expected.
Buyer demand kept mortgage application in the positive last week, up 0.3% compared with the previous week, according to the Mortgage Bankers Association’s seasonally adjusted index.
“There continues to be a stark recovery in purchase applications, as most large states saw increases in activity last week,” said MBA economist Joel Kan. “We expect this positive purchase trend to continue — at varying rates across the country — as states gradually loosen social distancing measures, and some of the pent-up demand for housing returns in what is typically the final weeks of the spring homebuying season.”
In the 10 largest states in MBA’s survey, New York led the purchase demand with a 14% jump in those applications. Illinois, Florida, Georgia, California, and North Carolina also had double-digit increases last week.
Low mortgage rates are certainly buoying demand. The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances of up to $510,400 increased from a record low 3.40% to 3.43%. Points, including the origination fee, decreased to 0.29 from 0.30 for loans with a 20% down payment.
At an open house in Atlanta last weekend, about a dozen potential buyers, mostly masked, came through the six-bedroom home in two hours. Mike and Anna Elmers said they were well aware that mortgage rates had hit a record low the previous week.
“It’s quite advantageous to pull the trigger right now to get a mortgage,” Mike Elmers said.
Applications to refinance a home loan have been falling for four straight weeks and dropped another 3% last week. They were still 201% higher than a year ago when interest rates were nearly a full percentage point higher. Lenders already overloaded with demand are not offering the lowest rates on refinances and also are facing higher risk due to the government’s coronavirus mortgage bailout program.
The refinance share of mortgage activity decreased to 67% of total applications from 70% the previous week.
Logan Mohtashami | Financial Writer
Diana Olick | CNBC