Weekly mortgage applications rose 55.4% for the week ending March 6 and the Mortgage Bankers Association (MBA) is now forecasting mortgage originations to come in around $2.61 trillion in 2020.
The expected volume of forecast origination is a 20.3% rise from 2019’s $2.17 trillion. The MBA reports that refinance originations are expected to double earlier projections—going from 36.7% to $1.23 trillion. Purchase originations are now forecasted to rise by 8.3% to $1.38 trillion.
The refinance index rose 79% from the prior week to its highest level since April 2009. It is also 479% higher than the same week in 2019. The purchases index increased just 6% from the previous week.
"Market uncertainty around the coronavirus led to a considerable drop in U.S. Treasury rates last week, causing the 30-year fixed rate to fall and match its December 2012 survey low of 3.47%. Homeowners rushed in, with refinancing applications jumping 79%—the largest weekly increase since November 2008," said Joel Kan, MBA's AVP of Economic and Industry Forecasting. "With last week's increase, the refinance index hit its highest level since April 2009. The purchase market also had a solid week, with activity nearly 12% higher than a year ago. Prospective buyers continue to be encouraged by improving housing inventory levels in some markets and very low rates."
Holden Lewis, home and mortgage expert at NerdWallet, said homeowners “ got the message loud and clear” as mortgage rates fell to their lowest level in decades last week.
“Rates have bounced back a little bit, but millions of homeowners still have an opportunity to refinance. Some lenders have all the business they can handle, and have raised rates temporarily to cut down the flow of applications so they won't be overwhelmed,” Lewis said. “That's why it pays to shop around and to be persistent and patient when you search for a lender that is able to offer a good deal.”
Julio Gonzalez, CEO of ETS, said, as shown in the MBA report, that low rates will drive refinance and stimulate purchases. However, it could also drive homebuyers to technology.
“Although physical visits to look at properties are down ... virtual visits are skyrocketing as brokers are driving purchases through technology. No doubt the virus will drive the new norm which will be more acquisitions through tech,” Gonzalez said.
Eddie Shapiro, CEO, President, and founder of Nest Seekers International, said while the travel, entertainment, and hotel industries are taking a hit due to the coronavirus, the real estate industry, and homeownership is “more and more attractive.”
“It is and always will be the right alternative if you are looking for stability, safety, and long term wealth presentation,” he said. “The cost of borrowing is incredibly low and seems that will continue to go down even further. In addition, real estate holdings, in general, is not a volatile sector. It will continue to attract more participants who are looking for a safe haven in this environment and uncertain times.”