Home purchases and refinancing perked up last week, as homebuyers and owners brushed off any concerns they had left over about the economy and the coronavirus pandemic.
The number of purchase applications increased 15% from the previous week and was up 13% from a year ago on an unadjusted basis, according to the Mortgage Bankers Association, a trade organization.
Refinances also spiked by 23.8% for the week ending June 5 and are 80.4% higher than the same week in 2019, reflecting homeowners’ desire to lock in near record-low interest rates.
“The fact that applications are rising signals that even in the face of record-high unemployment, buyer demand and confidence in the housing market remains high,” said Danielle Hale, chief economist at Realtor.com, a listing site. “This is consistent with survey data from Fannie Mae, and sets the housing market up to be a hero in the economic recovery, a stark contrast with the previous recession.”
The share of refinance activity climbed to 61.3% of all mortgage activity compared with last week’s 59.5%. The increase occurs after many homeowners couldn’t refinance because lenders couldn’t keep up with requests, especially if
“Refinances moved higher for the first time in nearly two months, with both conventional and government applications rising and the overall index coming in 80% above year-ago levels,” said Joel Kan, associate vice president of economic and industry forecasting at MBA.
Refinances also fueled an uptick in activity for loans backed by the Federal Housing Administration.
FHA loans experienced an uptick of 23%, a contrast to the prior week’s drop of 13%. Refinances increased by 29.2% for the week, with purchase activity seeing a 13.9% jump.
Read more: When to refinance a mortgage
First-time homebuyers often use FHA loans to purchase their house because these mortgages have low down payment requirements and less strict credit requirements. The downside is that mortgage insurance is often tacked onto the loan, resulting in higher monthly payments.
But while housing activity bloomed last week, experts noted that housing supply continues to remain low.
“Builders are having a hard time during this pandemic maintaining a site, especially with social distancing and operational challenges,” said Skyler Olsen, chief principal economist at Zillow.com. “There’s just so much uncertainty about producing a lot of volume, especially as this sector is experiencing unemployment much more heavily.”