• Market Crumbs

Mortgage Activity Slows


Image via Tom Rumble on Unsplash

Last month, when mortgage rates collapsed, homeowners and home buyers rushed to capitalize on the move in rates.


At the time, mortgage applications to refinance jumped 79% on a weekly basis at one point, a nearly 500% increase from the same period a year earlier. Albeit at a much slower rate, mortgage applications to purchase a home increased over the same period as well. Combined, total mortgage application volume was up more than 50% on a weekly basis, with the year-over-year change nearly 200% higher.


As the outbreak of COVID-19 has continued to slow the U.S. economy, causing job losses and dampening Americans' confidence, the rate of mortgage refinances and mortgage applications to purchase appears to be slowing, while requests to delay mortgage payments are surging.


Mortgage applications to purchase a home and to refinance dropped 12% and 19%, respectively, from the previous week, according to the Mortgage Bankers Association’s seasonally adjusted index. Combined, total mortgage application volume fell nearly 18% from last week.


"Given the ongoing rate volatility, along with the persistent lack of liquidity in certain sectors of the [mortgage-backed securities] market, we expect to see continued weekly swings in refinance activity," said Joel Kan, vice president of economic and industry forecasting at the Mortgage Bankers Association.


Some of the states that have been hit the hardest by the coronavirus saw staggering drops in mortgage volume. Mortgage applications to purchase a home fell 47.5% annually in California, 55.4% in New York and 59.9% in Washington.


The average 30-Year fixed rate mortgage is slightly higher than last month, but is still nearly a full percent lower than the same period last year.

Given the current environment, enthusiasm among both home buyers and sellers is waning. According to a survey from realtor.com, nearly half of buyers are less optimistic about buying a home, with 37% of prospective purchases saying they plan to delay buying a home. Nearly 50% of sellers intend on delaying selling their home, while 60% are less optimistic about selling their home.


Earlier this week, the Mortgage Bankers Association also showed the number of borrowers requesting mortgage forbearance surged. Forbearance requests jumped 1,270% between March 2 and 16, while jumping 1,896% between March 16 and 30.


It's also getting more difficult to get through to mortgage companies. Call center average speed to answer increased to 17.5 minutes from under 2 minutes three weeks ago, while 25% of borrowers are abandoning calls versus 5% three weeks ago.


With the effects of the coronavirus on unemployment, the stock market and the economy as a whole likely to linger for quite some time, it will be interesting to see how the housing market responds.


Leftover Crumbs

  • Geico gives back. Geico is the latest auto insurer to put money back into its customers pockets as COVID-19 has caused a decline in driving. Geico is offering about $2.5 billion in credits to its 19 million policyholders, as well as a 15% credit on policies up for renewal. "The ongoing crisis has widespread effects that will linger," Geico CEO Todd Combs said. "Our customers have been loyal, and we are committed to doing all we can to help them."

  • Tesla slashes pay. Tesla is cutting salaried employees’ pay and will furlough hourly workers as health orders to limit the spread of COVID-19 caused the automaker to suspend production. Hourly workers will be furloughed until May 4, when Tesla expects production at its Fremont, California car plant to resume. The pay cuts will be in effect through the end of the second quarter.

  • Disney may check temperatures. The Walt Disney Company is planning for the reopening of its theme parks, which may include checking visitors' temperatures. "One of the things that we’re discussing already is that in order to return to some semblance of normal, people will have to feel comfortable that they’re safe," Disney Executive Chairman Bob Iger said. "Just as we now do bag checks for everybody that goes into our parks, it could be that at some point we add a component of that that takes people’s temperatures, as a for-instance."

  • Zoom hit with a lawsuit. Zoom Video Communications, which has come under criticism as of late, has been hit with a with a class action lawsuit by shareholders alleging the company overstated its privacy standards and failed to disclose the software is not end-to-end encrypted. Zoom has also hired Facebook's former security chief to overhaul the company's privacy and security.

  • GM awarded contract. General Motors has been awarded a $489.4 million contract by the U.S. Department of Health and Human Services to supply 30,000 ventilators by the end of August. GM, which is working with ventilator firm Ventec Life Systems, will deliver 6,132 ventilators by June 1. A GM spokesperson said the company "will fulfill the government contract and (has) the capacity to supply more if needed."