Key Highlights

  • Purchase loan applications rose another +5% from the prior week, according to the Mortgage Bankers Association (MBA)
  • Purchase loan applications came in +13% higher compared to one year ago
  • Average contract interest rate for 30-year fixed up to 3.38% from 3.37%

The slight rise in interest rates from 3.37% to 3.38% did nothing to quell home purchase loan applications this past week. According to the Mortgage Bankers Association (MBA), purchase applications rose an additional +5% from the prior week and were up an impressive +13% compared to one year ago.

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This is the eighth consecutive week of increasing purchase activity. Joel Kan, an economist with the MBA, said, “The recovery in the purchase market continues to gain steam, with the seasonally adjusted index rising to its highest level since January.”

The combination of pent-up demand and low interest rates are driving this rapid home buying. The only problem…there are too few homes for sale with inventory being down -25% from one year earlier, according to Zillow. (Zillow, by the way, is seeing an uptick of +19.3% m/m new sales listings.)

The refinance share of mortgage activity increased to 61.3% of total applications from a share of 59.5% the previous week. Though up by comparison for the week, the annual comparison in refinances is becoming smaller and smaller. Why? Fewer buyers are able to benefit from refinancing particularly because lenders don’t want the added risk from COVID mortgage relief programs.

At Wednesday’s meeting of the Federal Reserve, the Fed voted to keep benchmark short-term rates near zero. The Fed also forecast that the economy is likely to shrink -6.5% in 2020 with expectations that the economy will show a +5% gain in 2021 along with a +3.5% gain in 2020.

The central bank expects to “…maintain this target range until it is confident that the economy has weathered recent events and is on track to achieve its maximum employment and price stability goals.”

Fed Chair Jerome Powell said that the central bank’s expectations are based upon “…the general expectation of an economic recovery beginning in the second half of this year and lasting over the next couple of years, supported by interest rates that remain at their current level near zero.”

The Fed’s economic forecasts released this week included:

  • GDP: -6.5% in 2020; 5%, 3.5%, 1.8%
  • Unemployment: 9.3%, 6.5%, 5.5%, 4.1%
  • Core Inflation: 1%, 1.5%, 1.7%

Thanks to HousingWire’s Diana Olick and Jeff Cox and InmanNews.

Also read: Podcast: Happening Now, Breaking News About Housing | Tim and Julie Harris, Best Social Media Marketing Tools for 2020 – Part II, Is Remote Working the “Extension Cord” Buyers Need for Suburban Living?