Social distancing orders are being loosened across the country, and it seems homebuyers are taking … [+]
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Social distancing orders are being loosened across the country, and it seems homebuyers are taking full advantage. According to the latest data from the Mortgage Bankers Association, applications to purchase a home were up 11% last week, marking the third-straight week of increases.
To be fair, purchase activity is still down 10% over the year, but that year-over-year gap is thinning out every week. In April, the number of purchase loan applications was down 35% annually.
New York saw a 14.3% uptick in purchase loan applications—the biggest in the country, while Illinois, Florida, Georgia, California, and North Carolina also saw double-digit jumps for the week.
According to Joel Kan, MBA’s associate vice president of economic and industry forecasting, we can expect the wave of improvement to keep on spreading.
“There continues to be a stark recovery in purchase applications, as most large states saw increases in activity last week,” he said. “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,” he said.
Despite record-low mortgage rates, refinance applications have actually been declining in recent weeks. The average rate on a 30-year, fixed-rate loan came in at 3.43%, but refinancing activity dropped 3% this week and 2% the week prior. This is likely due to a combination of factors, including tightening lending standards, increasing unemployment and more time-strapped lenders.
“Mortgage rates stayed close to record lows, but refinance applications decreased for the fourth consecutive week, driven by a 5% drop in conventional refinances,” Kan said. “Despite the downward trend over the last month, mortgage lenders remain busy. Refinance activity was up 200% from a year ago.”
If rates continue to drop, demand for refinances may see an even bigger spike. According to a report from Bloomberg, mortgage rates could drop below 3% in the coming weeks—well below the lowest point on record. This could add serious incentive for homeowners to refinance.
In fact, according to the recent Mortgage Monitor report from real estate analytics firm Black Knight, if rates drop to just 3%, more than 19 million homeowners could shave at least 0.75% off their mortgage rate.
On a $250,000 home, that could mean a difference of around $80 per month and nearly $1,000 per year.