Purchase applications increased for a fifth straight week, rising 6% on an adjusted basis compared with the previous week but down 1.5% compared with a year earlier, according to the Mortgage Bankers Association’s (MBA) Weekly Applications Survey.
Pent-up demand and gradual relaxation of shelter-in-place rules likely helped.
Applications for refinances, on the other hand, decreased 6% from the previous week, despite historically low mortgage rates. Although applications for refinances dipped, they were nonetheless up 160% compared with the same week one year ago.
For the week ended May 15, total volume – applications for purchases and refinances combined – fell 2.6% compared with the previous week.
“Applications for home purchases continue to recover from April’s sizable drop and have now increased for five consecutive weeks,” says Joel Kan, associate vice president of economic and industry forecasting, for the MBA, in a statement. “Purchase activity – which was 35 percent below year-ago levels six weeks ago – increased across all loan types and was only 1.5 percent lower than last year.
“Government purchase applications, which include FHA, VA, and USDA loans, are now five percent higher than a year ago, which is an encouraging turnaround after the weakness seen over the past two months,” Kan says. “As states gradually reopen and both home buyer and seller activity increases, we will be closely watching to see if these positive trends continue, or if they reflect shorter-term, pent-up demand.”
With regard to the decrease in refinance activity, Kan says, “The average loan amount for refinances fell to its lowest level since January – potentially a sign that part of the drop was attributable to a retreat in cash-out refinance lending as credit conditions tighten.”
“We still expect a strong pace of refinancing for the remainder of the year because of low mortgage rates,” he adds. “With many homeowners still facing economic and employment uncertainty, these refinance opportunities will allow them to save money on their monthly payments, which can then be used to help other areas of their budgets.”
The refinance share of mortgage activity decreased to 64.3% of total applications, down from 67.0% the previous week.
The adjustable-rate mortgage (ARM) share of activity increased to 3.2% of total applications.
The average rate for a 30-year fixed-rate mortgage was 3.41%, down from 3.43%.