With mortgage rates still hovering near all-time lows and more than half the country still in lockdown, one would expect to see applications for refinances on the rise and applications for home purchases hitting all-time lows – but that has not been the case.
This past week, for example, applications for refinances dipped 3% on an adjusted basis while applications for purchases increased 11%, according to the Mortgage Bankers Association’s (MBA) Weekly Applications Survey.
As a result, total application volume increased 0.3%.
It was the fourth straight week that applications for refinances fell.
Granted, mortgage rates did increase slightly: During the week ended May 8, the average rate for a 30-year fixed rate mortgage was 3.43%, up from 3.40% the previous week.
On an unadjusted basis, total application volume increased 1%.
Although applications for refinances were down week-over-week, they were nonetheless up 201% compared with the same week one year ago.
Although applications for purchases were up week-over-week, they were down 10% compared with the same week one year ago.
“There continues to be a stark recovery in purchase applications, as most large states saw increases in activity last week,” says Joel Kan, Associate Vice President of Economic and Industry Forecasting for the MBA, in a statement. “In the ten largest states in MBA’s survey, New York – after a nine percent gain two weeks ago – led the increases with a 14 percent jump. Illinois, Florida, Georgia, California and North Carolina also had double-digit increases last week.
“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 home buying season,” Kan says.
“Mortgage rates stayed close to record-lows, but refinance applications decreased for the fourth consecutive week, driven by a 5 percent drop in conventional refinances,” he adds. “Despite the downward trend over the last month, mortgage lenders remain busy. Refinance activity was up 200 percent from a year ago.”
The refinance share of mortgage activity decreased to 67.0% of total applications, down from 70.0% the previous week.
The adjustable-rate mortgage (ARM) share of activity decreased to 2.9% of total applications.