Home loan applications dropped last week as refinancing requests waned but requests for purchases showed a healthy gain.
The Mortgage Bankers Association’s index measuring home loan application volume slid 3.3 percent, seasonally adjusted, for the period ending April 24 from the week before. But one element of that index — a metric tracking mortgage applications to buy single-family homes — jumped by 12 percent, nearly four times the previous week’s rise.
Joel Kan, MBA’s associate vice president of economic and industry forecasting, said in a statement that it could be “a sign of the start of an upturn in the pandemic-delayed spring homebuying season, as coronavirus lockdown restrictions slowly ease in various markets.”
He also noted it was the strongest level in about a month and pointed to a “significant gain” in New York after five of the past six weeks saw purchase activity decline.
Purchase applications in New York rose 13.7 percent last week — not seasonally adjusted — after dropping 8.3 percent the week before.
In California, activity increased by 17.2 percent, unadjusted, after edging up by 2.9 percent the previous week. Washington saw purchase activity rise by 16.1 percent unadjusted on the heels of a 12.3 percent gain.
Kan attributed that to mortgage rates falling to record lows. The 30-year fixed mortgage rate dropped to 3.43 percent, down 2 basis points from the prior week’s contract rate and 99 basis points below the year-ago figure.
The broader index, which includes refinance applications, still dropped because the vast majority of last week’s mortgage activity, 72 percent, was refinancing. Although home loan applications for purchases climbed, they accounted for only about a quarter of the pie.
With the coronavirus pandemic putting a major damper on home-buying, the purchase index is down more than 20 percent year-over-year. The week ending April 3, purchase application activity fell to its lowest level since 2015.
The refi index fell 7.3 percent — the second consecutive decline. Kan attributed that to refinance rates remaining higher than purchase loan rates.
“Lenders are still working through pipelines at capacity, and observed changes in credit availability for refinance loans have also in turn impacted rates,” he said.
Three weeks ago, for the week of April 10, MBA’s overall mortgage index trended up thanks to homeowners looking to refinance. Some have speculated that homeowners converted some home equity to cash to weather the economic slowdown.
Write to Erin Hudson at [email protected]