Coronavirus Turns Boon For US Housing: Mortgage Applications Rise
Zacks Investment Research | Mar 11, 2020 09:21PM ET
As economic uncertainty arising from the coronavirus outbreak dragged down interest rates, homebuyers are applying for mortgages at a level not seen in more than a decade. Mortgage applications for people looking to buy a house grew 55.4% from a week earlier — the highest since April 2009. According to data released on Mar 11 by the Mortgage Bankers Association or MBA's Weekly Mortgage Applications Survey for the week ending Mar 6, 2020, volume was 192% higher annually.
Mortgage refinancing applications spiked 79% from the previous week, marking the highest weekly jump since November 2008 and a 479% increase from the same week a year ago.
MBA Doubles 2020 Refinance Originations Forecast
In view of the current interest rate and economic situation, MBA has almost doubled its 2020 refinance originations forecast to $1.2 trillion. This represents a 37% boost from 2019 and the strongest refinance volume since 2012.
The group also expects total mortgage originations of $26.1 trillion this year, suggesting a more than 20% gain from 2019 volumes. Purchase originations are now estimated to rise 8.3% to $1.38 trillion.
Joel Kan, an MBA economist, said, “As lenders handle the wave in applications and manage capacity, mortgage rates will likely stabilize but remain low for now. This in turn will support borrowers looking to refinance or purchase a home this spring.”
Mortgage Rates at Multi-Year Lows
Market uncertainty induced by the outbreak led to a considerable drop in U.S. Treasury rates last week, causing the 30-year fixed mortgage rate to spiral down to a record low of 3.29%, the lowest ever recorded by Freddie Mac in a series that goes back to 1971. Declining home loan rates have driven mortgage applications, hinting at possibilities that the U.S. housing market might be able to help the economy fend off a COVID-19 recession.
Notably, in an attempt to limit the virus-inflicted economic damage in the United States, the Fed last week announced an emergency rate cut of 50 basis points to a range of 1-1.25% that is expected to help the economy achieve its maximum employment and price stability goals (read more: Zacks Investment Research
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