(TheLibertyRevolution.com)- One area of the economy that’s showing surprising signs of a quick bounce back is the housing market.
In early April, purchase volume checked in at 35% lower than it was at that time in 2019. Just last week, though, purchase volume reached a level that was only 1.5% lower year-over-year.
The statistics from the Mortgage Bankers Association’s seasonally adjusted index show a rather shocking recovery in the housing market, which normally would be expected to take longer to recover. Applications for mortgages to purchase a house increased 6% last week from the week before.
Joel Kan, an economist with the MBA, said:
“Applications for home purchases continue to recover from April’s sizable drop and have now increased for five consecutive weeks. Government purchase applications, which include FHA, VA and USDA loans, are now 5% higher than a year ago, which is an encouraging turnaround after the weakness seen over the past two months.
With unemployment numbers through the roof and tough financial times ahead for many people, it wouldn’t have been a surprise if the housing market took a while to recover.
But there are a few factors working simultaneously that are pushing the industry forward.
First, mortgage rates are at record lows. According to Freddie Mac, the average 30-year fixed-mortgage rate for April was 3.31%. That’s the lowest rate since Freddie Mac started recording monthly averages back in 1971. The last time that rate was even below 3.4% was in October 2012.
Second, the MBA says there was “strong pent-up demand” for housing purchases before the coronavirus outbreak.
And third, there’s a new trend of families wanting to flee urban areas in favor of single-family homes in the suburbs, where people are not packed as tight on top of each other.
The housing market isn’t always a great indicator of the health of the economy, or the potential of it — as was seen dramatically with the housing crash and ensuing financial crisis in 2008. The three main reasons for the increase in mortgage demand are all related to the coronavirus pandemic, and it’s no certainty that they will be long-lasting results.
The other half of the mortgage industry, loan refinances, dropped off in demand recently. Refinance applications dropped 6% last week, according to MBA data, but still notched in at 160% higher than last year, when rates were roughly 92 basis points higher than they are now.
“The average loan amount for refinances fell to its lowest level since January — potentially a sign that part of the drop was attributable to a retreat in cash-out refinance lending as credit conditions tighten,” Kan said. “We still expect a strong pace of refinancing for the remainder of the year because of low mortgage rates.”
Government regulators updated guidelines for lenders Fannie Mae and Freddie Mac to allow refinances for loans that were part of the federal mortgage bailout. The relaxing of those rules came as part of the coronavirus economic stimulus package Congress passed.
