Buyers are reemerging in the housing market much faster than anticipated. Mortgage applications are often an indicator of future home buying activity, and applications for home purchases have increased for five consecutive weeks. After increasing 6% last week compared to the previous week, applications for home purchases are now just 1.5% lower than a year ago, the Mortgage Bankers Association’s seasonally adjusted index shows.
The rebound is significant considering purchase volume was down 35% annually just six weeks ago as the U.S. ramped up its battle against the COVID-19 pandemic.
“Applications for home purchases continue to recover from April’s sizable drop and have now increased for five consecutive weeks,” says Joel Kan, an MBA economist. “Government purchase applications, which include FHA, VA, and USDA loans, are now 5% higher than a year ago, which is an encouraging turnaround after the weakness seen over the past two months.”
Record low mortgage rates and strong pent-up demand are bringing home buyers back to the market as states begin to reopen. The average contract interest rate for the 30-year fixed-rate mortgage decreased from 3.43% to 3.41% last week (with 0.33 points on the loan).
Refinance applications, meanwhile, are falling. Applications for refinancings dropped 6% last week and reached the lowest level in activity in more than a month. However, refinance applications are still 160% higher than a year ago as homeowners continue to lock in lower rates.
Source: “Weekly Mortgage Applications Point to a Remarkable Recovery in Homebuying,” CNBC (May 20, 2020)
