Reports show that weekly mortgage applications in the US real estate market are up as mortgage interest rates continue to drop.
An Increase in Weekly Mortgage Activity
The Mortgage Bankers Association reported that the total volume of mortgage applications saw a jump of 5.2% week-over-week. Compared to the same time last year when mortgage interest rates were higher, this is an increase of 69% in the total volume.
For a 30-year fixed-rate mortgage with a conforming loan balance ($484,350 or less), the average contract interest rate fell from 3.99% to 3.90%. Points dropped from 0.38 to 0.37 for mortgage loans with a down payment of 20%. Compared to the same time last year, the rate has dropped 115 basis points.
Joel Kan, the Associate Vice President of Economic and Industry Forecasting at the Mortgage Bankers Association, explains:
U.S. Treasury rates moved sharply lower last week, as data showing weakness in the services sector was a sign that slowing economic growth is not confined to the manufacturing sector. This in turn caused a flight to safety by investors, resulting in mortgage rates dropping across the board, with the 30-year fixed rate decreasing nine basis points to 3.9%—the lowest level in a month. As seen a few times this year, the large drop in rates caused another surge in refinance applications. The refinance index increased 10% to its highest level since late August, with both conventional and government refinances experiencing an upswing.
Refinance mortgage applications are what caused the increase in the total volume. As Kan explained, the drop in mortgage interest rates sparked rate-sensitive refinance applications to jump by 10% week-over-week, up 163% from the same week in 2018. Looking at the share of refinances in the total volume for mortgage applications, there was a rise from 58% to 60.4% week-over-week.
Although activity may be up in the mortgage market thanks to the lower rates, it’s a different story for homebuyers. Homebuyer mortgage applications actually fell last week by 1% because these mortgages are not as sensitive to changes in interest rates week over week. Kan chalks it up to the economic and market uncertainty:
Despite low rates, the cloudier economic outlook and ongoing market uncertainty may be keeping some potential homebuyers away from the market this fall.
Fannie Mae’s HSPI (Home Purchase Sentiment Index) fell 2.3 points last month. Still, homebuyer mortgage applications were 10% higher than the same time last year. And the SVP and Chief Economist at Fannie Mae, Doug Duncan, says consumer sentiment is still relatively high in the US housing market:
Views about the direction of the economy held relatively steady, and the share of respondents who say it’s a good time to buy or sell a home rose slightly. However, consumers who are pessimistic about current housing market conditions are more likely to cite unfavorable economic conditions than the prior month. Job confidence remains high but still well shy of its July reading. Despite some added uncertainty, the September HPSI indicates continued strength in housing market attitudes and is consistent with recent data on housing activity.
Refinancing to Buy Another Investment Property
As mortgage interest rates continue to drop, now is a good time for real estate investors to consider refinancing to buy another investment property. Learn more by reading How to Refinance Investment Property to Buy Another. And start searching for and analyzing your next investment property with Mashvisor.
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