Photo: James Bombales
Mortgage rates are playing a game of limbo, dropping lower than they’ve ever gone and luring prospective homebuyers in the process. Last week, amid news that the average 30-year fixed mortgage rate had fallen below 3 percent, mortgage loan applications jumped 4.1 percent over the previous week on a seasonally adjusted basis, according to the latest survey from the Mortgage Bankers Association (MBA).
Refinance activity also increased by 5 percent compared to the week prior. While that might not seem like a significant boost, it’s 122 percent higher than the same period one year ago. The seasonally adjusted purchase index, which predicts the number of home sales in a given week, ticked up 2 percent from the week before and was still 19 percent above last year’s total for that seven-day stretch. It was the ninth week in a row that purchase activity trended upward.
“There continues to be strong homebuyer demand this summer, as home shoppers have returned to the market in many states,” said Joel Kan, MBA’s Associate Vice President of Economic and Industry Forecasting.
Rising loan applications have translated into actual transactions, as evidenced by the National Association of Realtors’ June data for existing-home sales. Last month, nationwide sales of existing single-family homes, townhomes, condos and co-ops surged 20.7 percent from May at a seasonally adjusted annual rate of 4.72 million units.
Compared to last year, overall sales were down 11.3 percent but the housing market has been resilient in the face of COVID-19-related challenges.
“The sales recovery is strong, as buyers were eager to purchase homes and properties that they had been eyeing during the shutdown,” said Lawrence Yun, NAR’s chief economist. “This revitalization looks to be sustainable for many months ahead as long as mortgage rates remain low and job gains continue.”
Although buyer demand is high, the lack of available inventory, which plummeted 18.2 percent in June compared to the same time last year, is putting a damper on US home sales and causing prices to inch up. Inventory levels sank to 4.0 months of supply, down from 4.3 months in June 2019.
The median price for an existing home hit $295,300, a 3.5 percent year-over-year increase. Prices escalated in every major market across the country last month and homes sold in 24 days, on average — that’s two days sooner than in June of last year.
“Home prices rose during the lockdown and could rise even further due to heavy buyer competition and a significant shortage of supply,” added Yun.