Homebuyers are entering the market at a much brisker pace than many economists forecasted. Mortgage applications for home purchases continue their upward streak, rising 9% last week compared to the previous week, the Mortgage Bankers Association reports. This marks the sixth consecutive gain for home purchase applications and a 54% increase since early April.
“The home purchase market continued its path to recovery as various states reopen, leading more home buyers resuming their home search,” says Joel Kan, the MBA’s economist. “Additionally, the purchase loan amount has increased steadily in recent weeks and is now at its highest level since mid-March.”
Housing demand was strong at the start of the year but significantly declined as the COVID-19 pandemic set in. Economists are noticing the sudden uptick as buyers reenter the market. The Commerce Department reported this week that newly built single-family homes saw an increase of nearly 1% in April. Inventory shortages in the existing-home market are prompting more buyers to new homes, analysts speculate.
Further, home prices continue to hold strong due to a lack of housing inventory on the market.
Buyers could be being drawn to record low mortgage rates. The average contract interest rate on a 30-year fixed-rate mortgage was 3.42% last week, the MBA reports.
“The low mortgage rates, without a doubt, are helping to entice buyers back into the market,” Lawrence Yun, chief economist of the National Association of REALTORS®, told realtor.com®. Also, “real estate may be viewed as a safe asset in the upcoming years,” he adds.
Buyers are taking out larger mortgages. The average loan size was about $340,200 during the week ending May 22, up from a $315,300 low set during the week ending April 3, the MBA reports.
Meanwhile, refinance applications have not been performing quite as strongly as purchase applications. Refinance applications dropped 0.2% last week. Still, refinance applications are up 176% over a year ago.
Source: “Mortgage Demand From Homebuyers Shows Unexpectedly Strong and Quick Recovery, as Applications Spike 9% From a Year Ago,” CNBC (May 27, 2020) and “The Summer Home-Buying Season May Be Much Hotter Than Expected—Here’s Why,” realtor.com(R) (May 27, 2020)
