Mortgage applications increased by 18% as homebuyers return to the market, according to the Mortgage Bankers Association’s seasonally adjusted index.
Findings revealed that mortgage demand to buy a house soared by 5% for the week and were 18% higher than a year ago.
Mortgage applications were down 35% annually as the coronavirus outbreak was taking place six weeks ago.
“The pent-up demand from homebuyers returning to the market continues to support a recovery from the weekly declines observed earlier this spring,” said Joel Kan, an MBA economist.
“However, there are still many households affected by the widespread job losses and current economic downturn. High unemployment and low housing supply may restrain a more meaningful rebound in purchase applications in the coming months.”
Interest rate
The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances of up to $510,400 fell from 3.42% to 3.37%. Points, including the origination fee, for loans with a 20% down payment dropped from 0.33 to 0.30.
The impact of another new low for interest rates on homeowners to save a little cash was not that huge. Mortgage applications to refinance a house loan declined by 9% for the week. However, they were still 137% higher than a year ago. Interest rates were 86 basis points higher then. That pertained to the seventh straight week of falls in refinance activity.
“After reaching a peak of 76% earlier this year, refinances now account for less than 60% of activity, and the index is now at its lowest level since February 21,” Kan said.
Home sales
Home sales data in US show slight increase in April 2020. Sales of newly built houses increased by 1% in April compared with March, according to the U.S. Census.
There is a strong demand lately, according to builders. Sentiment recovered in May after a sharp decline in April, based on a monthly index from the National Association of Home Builders.
“The April data for new home sales show the potential for housing to lead any recovery for the overall economy,” said Dean Mon, chairman of the NAHB and a homebuilder and developer from Shrewsbury, New Jersey.
“Because the housing industry entered this downturn underbuilt, there exists considerable pent-up housing demand on the sidelines. The experience of the virus mitigation has emphasized the importance of home for most Americans.”
Newly built homes
The market for new homes is reportedly faring better than the market for existing houses even if sales were still 6% lower in April, compared with April 2019.
Analysts believe this is because there is a bigger supply of newly built homes, a 6.3-month supply at the end of April. The National Association of Realtors said that compares to a 4.2-month supply of existing homes for sale.
It is also more convenient to show a newly built home in April than an existing home to buyers. Customers can go through new models or see various online plans, while most existing home sellers used virtual touring only, not allowing strangers in their homes due to the coronavirus crisis.
Buyers who stay at home due to quarantine may also be thinking of fleeing from the confined spaces of the city.
“Bottom line, considering an almost complete shutdown of the U.S. economy in April, it’s pretty surprising to see sales hold up as well as they did,” said Peter Boockvar, chief investment officer at Bleakley Advisory Group. “Maybe it’s people fleeing the cities or whatever and a median home price of $309,900, the lowest since July 2019.”
