Mortgage Applications Drop Slightly

Mortgage applications fell slightly by 0.3% from the prior week for the week ending on April 17, according to the Mortgage Bankers Association (MBA).  

The report found that the Market Composite Index, a measure of mortgage loan application volume fell 0.3% from the prior week. The refinance index fell 1% from the previous week. 

The purchase index rose 3% from the week earlier but fell 31% year-over-year. 

"The pandemic-related economic stoppage has caused some buyers and sellers to delay their decisions until there are signs of a turnaround. This has resulted in reduced buyer traffic, less inventory, and March existing-homes sales falling to their slowest annual pace in nearly a year,” said Joel Kan, MBA's AVP of Economic and Industry Forecasting. 

Kan added that the 30-year fixed-rate mortgage remained near record lows in the MBA’s latest survey and that borrowers continue to take advantage of these low rates. 

Despite the low rates, the refinance share of mortgage activity fell to 75.4% from the prior week’s 76.2%. 

Also seeing drops recently were existing-home sales, which fell 8.5% in March, according to the National Association of Realtors (NAR). 

Despite the monthly decline, overall sales increased annually by 0.8% in March—marking the ninth straight month of gains. 

“Unfortunately, we knew home sales would wane in March due to the coronavirus outbreak,” said Lawrence Yun, NAR’s Chief Economist. “More temporary interruptions to home sales should be expected in the next couple of months, though home prices will still likely rise.”

Danielle Hale, Chief Economist at realtor.com, said that while home sales slowed in March, they have “surprised many with their resilience.” 

“This is largely because March’s data reflects buyer and seller agreements reached in January and February before the coronavirus was on the radar for most of the U.S. In fact, even as recently as early March, most U.S. consumers expected the coronavirus pandemic to have just minimal job and economic impact,” Hale said. 

She added that 77% of home contracts were settled on time with no delays caused by the virus. Hale, however, said sellers are getting less aggressive with asking price growth and the share of new listings is falling compared to 2019.  

“These changes will mean fewer home sales and slower price growth in the months ahead, sapping momentum from the normally busy spring season,” she said. “But some home sales will continue, and the industry and consumers will get better at doing business in a 'socially distant' way as we get more practice with it.”