Mortgage applications for home purchases, a gauge of future home buying, saw a 12% uptick last week, reversing a month of plummeting activity due to the COVID-19 pandemic, the Mortgage Bankers Association reported. Housing experts say it could mark a sign that home buyers are returning.
Refinancing demand fell last week, which caused the overall volume to decline by 3.3% for the week, according to the MBA’s seasonally adjusted index. The overall mortgage application volume is still 20% lower than a year ago. But the increase in home purchase volume was the first uptick in weeks. Anecdotal reports from real estate firms point to an increase in buyer demand over the past two weeks, which is now starting to show up on purchase applications from buyers.
“The 10 largest states [by application volume] had increases in purchase activity, which is potentially a sign of the start of an upturn in the pandemic-delayed spring home buying season, as coronavirus lockdown restrictions slowly ease in various markets,” says Joel Kan, the MBA’s associate vice president of economic and industry forecasting. “California and Washington continued to show increases in purchase activity, with New York seeing a significant gain after declines in five of the last six weeks.”
One potential incentive for buyers to get moving: Borrowing costs remain near historical lows. The average contract interest rate for the 30-year fixed mortgage dropped from 3.45% to 3.43% last week, the MBA reports. (Points and the origination fee averaged 0.34 for loans with a 20% down payment.)
Meanwhile, applications for refinancing dropped 7% last week. Still, applications are 218% higher than a year ago as homeowners rush to take advantage of low rates in lowering their monthly mortgage payments. But some lenders reportedly are offering more limited refinancing products recently, working through capacity issues and navigating a wave of homeowners taking forbearance options that have hit bank profits. Refinance interest rates have moved slightly higher than have rates to purchase a home, CNBC reports.