The housing markets are showing signs of recovery on the mortgage front amidst the pandemic. Mortgage interest rates have reached an all-time low, incentivizing more buyers. And while forbearance rates have increased, growth rates have slowed in the last month.
Here’s the Latest:
Interest Rates
Mortgage rates dropped again, reaching an all-time low, according to Freddie Mac’s Primary Mortgage Market Survey®. The 30-year fixed-rate mortgage is now averaging 3.13 percent, down from last week’s 3.21 percent. The 15-year fixed-rate mortgage averages 2.58 percent, down from last week’s 2.62 percent. In addition, the 5-year Treasury-Indexed Hybrid ARM averages 3.09 percent, down from last week’s 3.10 percent.
“While the rebound in the economy is uneven, one segment that is exhibiting strength is the housing market. Purchase demand activity is up over twenty percent from a year ago, the highest since January 2009. Mortgage rates have hit another record low due to declining inflationary pressures, putting many homebuyers in the buying mood,” said Sam Khater, Freddie Mac’s chief economist. “However, it will be difficult to sustain the momentum in demand as unsold inventory was at near record lows coming into the pandemic and it has only dropped since then.”
Mortgage Applications
Total mortgage applications increased 8 percent from the previous week, according to the latest Mortgage Bankers Association (MBA) Weekly Mortgage Applications Survey for the week ending June 12. Unadjusted, the Index increased 7 percent from the previous week. The Refinance Index increased 10 percent from the previous week—106 percent higher YoY. The seasonally adjusted Purchase Index increased 4 percent from the previous week. The unadjusted Purchase Index increased 2 percent compared with the previous week—21 percent higher YoY.
“Purchase applications increased to the highest level in over 11 years and for the ninth consecutive week. The housing market continues to experience the release of unrealized pent-up demand from earlier this spring, as well as a gradual improvement in consumer confidence,” said Joel Kan, MBA’s associate vice president of economic and industry forecasting. “Mortgage rates dropped to another record low in MBA’s survey, leading to a 10 percent surge in refinance applications. Refinancing continues to support households’ finances, as homeowners who refinance are able to gain savings on their monthly mortgage payments in a still-uncertain period of the economic recovery.”
In May, mortgage applications for new-home purchases increased 10.9 percent, according to the MBA’s Builder Application Survey (BAS). YoY, applications increased by 26 percent.
By product type, conventional loans made up 62.5 percent of total loan applications, FHA loans made up 24.5 percent, RHS/USDA loans made up 1.2 percent and VA loans made up 11.8 percent. The average loan size for new homes decreased from $334,641 in April to $332,793 in May.
“The solid increase in new-home purchase applications in May is another indication of a recovery in the housing market. MBA estimates that new home sales rebounded 26 percent last month—a healthy turnaround after three months of declines,” said Kan. “Homebuyer traffic is rising, and homebuilders are continuing to ramp up production following the COVID-19 pandemic-related restrictions. We expect to see additional near-term strength in the coming months from the resumption of delayed sales activity caused by the social distancing and stay-at-home orders during March and April.”
Forbearance
According to the MBA’s latest Forbearance and Call Volume Survey, the total number of loans in forbearance programs only increased from 8.53 percent to 8.55 percent as of June 7. Almost 4.3 million homeowners currently have their mortgages in forbearance.
“MBA’s survey results from the first week of June showed a slight uptick in the overall share of loans in forbearance, but this increase was primarily driven by a larger share of portfolio and PLS loans in forbearance. Half of the servicers in our sample saw the forbearance share decline for at least one investor category,” said Mike Fratantoni, MBA’s senior vice president and chief economist. “Although there continues to be layoffs, the job market does appear to be improving, and this is likely leading to many borrowers in forbearance deciding to opt out of their plan.”
Added Fratantoni, “With June mortgage payments due, servicers did report the first increase in forbearance requests in two months. The level of forbearance requests is still quite low, but there was a noticeable increase in call volume over the course of the week.”
Delinquencies
Commercial and multifamily mortgage delinquencies remained low at the end of the first quarter of 2020, according to the MBA’s latest Commercial/Multifamily Delinquency Report.
Based on the unpaid principal balance (UPB) of loans, delinquency rates at the end of the Q1 2020 were:
– Banks and thrifts (90 or more days delinquent or in non-accrual): 0.51 percent, an increase of 0.09 percentage points from Q4 2019;
– Life company portfolios (60 or more days delinquent): 0.04 percent, unchanged from the fourth quarter;
– Fannie Mae (60 or more days delinquent): 0.05 percent, an increase of 0.01 percentage points from the fourth quarter;
– Freddie Mac (60 or more days delinquent): 0.08 percent, unchanged from the fourth quarter; and
– CMBS (30 or more days delinquent or in REO): 1.79 percent, a decrease of 0.28 percentage points from the fourth quarter.
“This year’s first quarter marked the end of a long period of extraordinarily low and stable delinquency rates for commercial and multifamily mortgages,” said Jamie Woodwell, MBA’s vice president of commercial real estate research. “With the onset of the COVID-19 pandemic and our social and economic responses to it, more recent data from MBA and others show increasing pressure on delinquency rates, particularly for loans backed by hotel and retail properties—where the impacts have been most immediately and dramatically felt.”
Stay tuned to RISMedia for continued mortgage updates.
