Weekly Mortgage Applications Point to a Remarkable Recovery in Homebuying

Mortgage

Purchase application data is up 6% week to week and now only down 1.5% year over year. That is a 33.5% growth on a year over year basis from the recent Coronavirus lows. 

2020 Before Coronavirus (BC) average growth + 11.6% year over year

Year over year AD (After the Disease) 
-11%
-24%
-33%
-35% (The peak % decline)
-31%
-20%
-19%
-10%
-1.5%

AD average is - 20.5%

If mortgage demand is an indicator, buyers are coming back to the housing market far faster than anticipated, despite coronavirus shutdowns and job losses.

Mortgage applications to purchase a home rose 6% last week from the previous week, according to the Mortgage Bankers Association’s seasonally adjusted index. Purchase volume was just 1.5% lower than a year ago, a rather stunning recovery from just six weeks ago, when purchase volume was down 35% annually.

“Applications for home purchases continue to recover from April’s sizable drop and have now increased for five consecutive weeks,” said Joel Kan, an MBA economist. “Government purchase applications, which include FHA, VA, and USDA loans, are now 5 percent higher than a year ago, which is an encouraging turnaround after the weakness seen over the past two months.”

As states reopen, so are open houses, and buyers have been coming out in force, if masked. Record low mortgage rates, combined with strong pent-up demand from before the pandemic and a new desire to leave urban downtowns due to the pandemic, are driving buyers back to the single-family home market. It remains to be seen if this is simply the pent-up demand or a long-term trend.

Buoying buyers, the average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances of up to $510,400 decreased to 3.41% from 3.43%. Points including the origination fee increased to 0.33 from 0.29 for 80 percent loan-to-value ratio loans.

“The average loan amount for refinances fell to its lowest level since January — potentially a sign that part of the drop was attributable to a retreat in cash-out refinance lending as credit conditions tighten,” said Kan. “We still expect a strong pace of refinancing for the remainder of the year because of low mortgage rates.”

Sources: 
Logan Mohtashami | Financial Writer

Diana Olick | CNBC
Mortgage Bankers Association.

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