Mortgage Activity Slows
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.
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