Business

Mortgage demand from homebuyers shows strong and quick recovery

Today News

A realtor, at right, shows prospective buyers a property in Newport Beach, California.

Jamie Rector | Bloomberg | Getty Images

It’s not as if the coronavirus pandemic has gone away, but after a sharp pullback, homebuyers are now piling back into the housing market much faster than expected.

Ads

Mortgage applications to purchase a home rose 9% last week from the previous week and from a year earlier, according to the Mortgage Bankers Association’s seasonally adjusted index. It was the sixth straight week of gains and a 54% recovery since early April.

“The home purchase market continued its path to recovery as various states reopen, leading to more buyers resuming their home search,” said Joel Kan, an MBA economist. “Additionally, the purchase loan amount has increased steadily in recent weeks and is now at its highest level since mid-March.” 

The gain mirrors an unexpectedly strong sales pace just reported for newly built homes in April. They were forecast to fall 22% but instead rose nearly 1% for the month, according to the U.S. Census. Buyers are rushing into the new home market, as the supply of existing homes keeps falling to new record lows. Some analysts also believe there is now a flight from urban downtowns, where people have been sheltered in small apartments, to suburban markets, where they can find more space, especially backyards and home offices. 

RELATED:  Bitcoin surpasses $60,000 in record high as rally accelerates

Buyers were also helped by near record low mortgage rates. The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances of $510,400 or less increased to 3.42% from 3.41%. Points, including the origination fee, remained unchanged at 0.33 for loans with a 20% down payment.

Refinance volume has not been as strong. Those applications fell 0.2% for the week but were still 176%, higher than one year ago, when interest rates were 91 basis points higher. 

“Conventional refinance applications increased 2 percent, while government refinancing was down almost 7 percent,” Kan said in a statement.

Adding refinances and purchase applications together, total mortgage application volume was up 2.7% for the week. The refinance share of mortgage activity decreased to 62.6% of total applications from 64.3% the previous week. 

Mortgage rates hovered around new record lows at the end of last week but bounced back slightly to start this week. The expectation, however, is that they will remain low and could move even lower in the coming months.

“Rate movement is pretty minimal by normal standards as the bond market (which underlies interest rate momentum) has been relatively calm and sideways after coming to terms with the initial shock of the coronavirus market impact,” said Matthew Graham, chief operating officer at Mortgage News Daily. 

RELATED:  Rightly’s free credit reference checker gives power to the people, says THE CRUSADER

Demand for housing was strong at the start of this year, but pulled back sharply at the start of the pandemic. The quick recovery has surprised most forecasters, with some arguing that it is temporary. Home prices have not lost any steam yet, and given the lack of supply are unlikely to fall in any meaningful way.

It remains to be seen, however, how the reopening of the economy will progress. Should consumers be forced back indoors yet again, sales will likely suffer. If supply doesn’t increase meaningfully, demand could also be hit by a severe lack of affordability.

Today News || News Headlines || World News || Politics || Health || Technology News || Education News

Source

Tags
Show More

Related Articles

Back to top button
Close