For the third week in a row, home purchase loan application volume has increased, thanks to the strong growth seen in Texas, Arizona, and California. This further increase could be an indication of "pent-up demand for home buying," the data from the latest mortgage applications survey says.
The Mortgage Bankers Association's, also called MBA, has recently released its Weekly Mortgage Applications Survey for the week ending May 1, 2020. According to the survey, the seasonally adjusted Purchase Index--a weekly measurement of applications for a home loan across the U.S.--rose 6 percent from the previous week.
The increase was attributed mostly to the growth of 10.3, 11, and 10.1 percent posted in Texas, Arizona, and California, respectively. The unadjusted Purchase Index, meanwhile, increased by 7 percent from the previous week, but it was several percentage points lower compared to the same period last year.
The purchase volume is lower as compared with the number of applications during this time last 2019--down by 19 percent. As for the three states where growth was evident, only Texas came near the level where it was last year.
Although the purchase activity has experienced a decline from its levels the past year, the annualized deficit has improved as several states start to reopen. And the pent-up home buying demand becomes more apparent, according to Mike Fratantoni, Senior Vice President and Chief Economist of MBA.
The third successive increase in home loan applications may well be the best news so far for the housing market, which saw buyer interest falling the past couple of months amid the coronavirus pandemic.
A separate survey by the National Association of Realtors (NAR) conducted on May 3 - 4, 2020, indicated that 73 percent of its members said that there was a decline in buyer interest.
The NAR Flash Survey also noted that 30 percent of members reported a decrease in buyer interest by more than 50 percent. Only 3 percent reported an increase in activity, while 12 percent said there was no change.
As for the Market Composite Index, the MBA survey said that compared to the week before, there was an increase of 0.1 percent on a seasonally adjusted basis. On an unadjusted basis, however, an increase of once percent was posted from one week earlier.
The volume of mortgage application volume remained the same last week despite the decline of the 30-year fixed-rate mortgage by a record 3.40 percent, Mr. Fratantoni said.
Mr. Fratantoni furthered that although rates are lower, the refinance applications still declined. This is mainly because many of the lenders offer higher rates for refinances as compared to purchase loans. Meanwhile, other lenders are making cash-out refinance loans inaccessible at this time due to their inability to sell them to Freddie Mac and Fannie Mae.
The MBA Purchase Index is not a measure of the volume of houses sold or closed mortgage loans. Analysts, however, consider the index as a leading indicator of the residential housing market. While it is a good predictor of home sales activity, predictions may not always be accurate.
