Welcome back to iLeads Mortgage Market Minute, where we bring you the latest, most relevant news regarding the mortgage market. We hope you enjoyed last week’s edition where we talked about Mortgage Applications Jump 13% as Refinancings Make a Comback. This week we’re bringing you: The Real Estate Market Heats Up: Housing Demand is 25% Above Pre-Pandemic Levels
Purchase Applications Hit 11yr High, Refi Boom Continues*
Mortgage Application volumes continued to grow during the week ended June 12 as mortgage rates reached new lows and states allowed more businesses to reopen. The Mortgage Bankers Association (MBA) said its Market Composite Index, a measure of application volume, increased 8.0 percent on a seasonally adjusted basis from one week earlier. On an unadjusted basis, the Index was up 7 percent compared with the previous week.
The volume of refinancing applications moved higher for the second straight week. That index increased 10 percent compared to the week ended June 5 and was 106 percent higher than the same week one year ago. Refinancing accounted for 63.2 percent of application activity, up from 61.3 percent the prior week.
The seasonally adjusted Purchase Index rose for the ninth time, a gain of 4 percent. The unadjusted Purchase Index increased 2 percent compared with the previous week and was 21 percent higher than the same week one year ago. Read more in-depth here.
Fannie Mae sees record-low mortgage rates through 2021*
The 2020 and 2021 annual averages will be the lowest on record, according to the forecast
The cheapest mortgage rates on the record are heading lower, Fannie Mae said in a forecast on Monday.
According to Fannie Mae, the annual average rate for 2020 will be 3.2%, down from 2019’s 3.9%. This would beat the record of 3.65% set in 2016, according to Freddie Mac data. Fannie Mae expects rates to drop to 2.9% in 2021.
The mortgage-rate forecast bodes well for housing demand and for refinancing volume, said Doug Duncan, Fannie Mae’s chief economist.
“While housing took a big hit this quarter, we believe the further reduction of mortgage rates, persistently low levels of supply, and strong buyer sentiment compared to seller sentiment should continue to provide support to home prices and new construction,” Duncan said.
The low rates probably will boost refi volume to $1.78 trillion this year, according to the forecast, which would be the highest level since 2003, when it was $2.5 trillion. Read more in-depth here.
Refi Surge Boosts Lender Sentiment*
The continued high volume of refinancing kept mortgage lenders’ outlook for profits relatively high during the second quarter, although it was down slightly from the first quarter of the year. Fannie Mae’s Mortgage Lender Sentiment survey found that more than half (52 percent) of lenders who responded believed that their profit margins would be higher than the prior quarter, while the remainder were almost equally divided between those who expected lower profits or that they would remain unchanged. The survey of senior mortgage executives was conducted between May 5, 2020 and May 18, 2020.
The lender optimism was based largely on the demand for refinancing, which outweighed a perceived decline in mortgage demand. The net share of lenders reporting demand growth for refis over the prior three months remained strong for all loans types (GSE-eligible, non-GSE-eligible, and government) and reached a survey high for GSE-eligible loans. Demand growth expectations on net for the next three months fell from last quarter but remained high across all loan types. Read more in-depth here.
Builder Confidence Crushes Expectations*
The COVID-19 outbreak struck a major blow to builder confidence in April. The prospect of widespread shutdowns of businesses and prolonged shelter at home orders sent the National Association of Home Builders/Wells Fargo Housing Market Index (HMI) spiraling down 42 points, its largest monthly change in a more than 30 year history, to a reading of 30. The index, a measure of home builder confidence in the market for new homes, recovered slightly in May, rising 7 points.
This morning NAHB said, in a sign that housing stands poised to lead a post-pandemic economic recovery, its index soared 21 points to 58, now only 14 points below where it finished in March. Any reading above 50 indicates a positive market.
NAHB’s leadership is clearly upbeat. Chairman Dean Mon said, “As the nation reopens, housing is well-positioned to lead the economy forward. Inventory is tight, mortgage applications are increasing, interest rates are low and confidence is rising. And buyer traffic more than doubled in one month even as builders report growing online and phone inquiries stemming from the outbreak.“
Analysts polled by Econoday had expected a much slower return of optimism in the sector. The consensus was for another 7-point increase in June, to 44. The highest estimate was only 50. Read more in-depth here.
The real estate market heats up: Housing demand is 25% above pre-pandemic levels*
Housing inventory is starting to improve but still not keeping pace with demand
Demand for houses continues to skyrocket, according to a report from Redfin CEO Glenn Kelman. Seasonally adjusted demand for houses during the week of June 1 through June 7 was 25% above pre-pandemic levels.
Kelman said that bidding wars have caused listings to move quickly, and sales prices are up 3.1% year over year. The percentage of newly listed homes to accept an offer within 14 days increased from 42% in May to 47% in June.
“Our abiding concern in May was about the number of homes for sale, but that’s improving too,” Kelman said. “After falling to 21% below last year’s level the week of May 25-31, new listings last week continued their recovery; last week’s new listings were 15% below last year’s level.” Read more in-depth here.
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