WASHINGTON–Buyers are coming back to the housing market much faster than expected. Demand kept mortgage application in the positive last week, up 0.3% compared with the previous week, according to the Mortgage Bankers Association's seasonally adjusted index.
The BMA data show applications to purchase a home rose for the fourth straight week, improving a robust 11%. The number of applications was still 10% lower compared with the same week one year ago, but that annual loss has been shrinking markedly. In the week prior, purchase volume was down 19% annually, and one month ago it was down 35%.
"There continues to be a stark recovery in purchase applications, as most large states saw increases in activity last week," said MBA Economist Joel Kan. "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."
According to the Mortgage Bankers Association, of the 10 largest states in its survey, New York led the purchase demand with a 14% jump in those applications. Illinois, Florida, Georgia, California and North Carolina also had double-digit increases last week, the MBA said.
Low Rates Driving Response
Mortgage volume is being goosed by low mortgage rates. The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances of up to $510,400 increased from a record low 3.40% to 3.43%. Points, including the origination fee, decreased to 0.29 from 0.30 for loans with a 20% down payment.
While credit unions are expecting to see strong refi volume, applications to refinance a home loan have been falling for four straight weeks and dropped another 3% last week. They were still 201% higher than a year ago, when interest rates were nearly a full percentage point higher. The refinance share of mortgage activity decreased to 67% of total applications from 70% the previous week.