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Mortgage Demand Falls for 2nd Week, Signaling Potential Housing Slowdown

Mortgage Demand Falls for 2nd Week, Signaling Potential Housing Slowdown
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Wednesday, 01 July 2020 10:19 AM

The surge in mortgage demand from homebuyers over the past two months appears to be waning, even as 30-year mortgage rates continue to drop, CNBC reported.

Mortgage applications to purchase a home fell for the second straight week, down 1% from the previous week, according to the Mortgage Bankers Association.

Refinance demand, the most sensitive to interest rates, fell 2% for the week but was 74% higher than a year ago.

The Market Composite Index, a measure of mortgage loan application volume, decreased 1.8 percent on a seasonally adjusted basis from one week earlier. 

"Mortgage applications fell last week despite mortgage rates hitting another record low in MBA's survey. Investors are contemplating the risks of the recent resurgence of COVID-19 cases to the labor market and economy, and Treasury rates and mortgage rates are moving lower as a result," said Joel Kan, MBA's Associate Vice President of Economic and Industry Forecasting.

"After two months of strong growth, purchase applications declined for the second week in a row. The weakening in activity is potentially a signal that pent-up demand is starting to wane and that low housing supply is limiting prospective buyers' options. The average purchase application loan size increased to a record high in our survey - more proof that tight inventory conditions are leading to faster price growth," Kan said.

"Refinance applications also decreased but remained 74 percent higher than a year ago. The 30-year fixed rate has been below the 3.5 percent mark since late March. It is possible that many borrowers have already refinanced or are waiting for rates to go even lower," Kan said.

The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($484,350 or less) decreased to 3.29 percent from 3.30 percent.

The average contract interest rate for 15-year fixed-rate mortgages remained unchanged at 2.81 percent.

Meanwhile, U.S. home prices gains accelerated in April even as sales have stumbled, a sign the coronavirus outbreak has had little impact on real estate values, the Associated Press reported earlier this week.

The S&P CoreLogic Case-Shiller 20-city home price index climbed 4% in April compared with a year earlier, the largest gain since December 2018, up from 3.9% in March.

Home sales have fallen sharply for three straight months to their lowest annual pace in nearly a decade in May. Yet the supply of available houses for sale has also declined, compared with a year ago, forcing remaining buyers to bid up prices.

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The surge in mortgage demand from homebuyers over the past two months appears to be waning, even as mortgage rates continue to drop
mortgage, demand, housing, loans, homes, rates
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2020-19-01
Wednesday, 01 July 2020 10:19 AM
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