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Following a rocky October, mortgage applications picked up for the week ending November 9, according to the ""Mortgage Bankers Association's"":http://www.mortgagebankers.org/default.htm (MBA) Weekly Mortgage Applications Survey.
[IMAGE]The survey's Market Composite Index, a measure of loan application volume, increased 12.6 percent from the previous week on a seasonally adjusted basis. On an unadjusted basis, the index was up 12 percent.
Applications for refinances leapt up, increasing 13 percent from the previous week and turning around a five-week decline. The refinance share of mortgage activity crept back up to 81 percent from 80 percent previously.
Interest in purchase mortgages also picked up. The Purchase Index rose a seasonally adjusted 11 percent from one week earlier, while the unadjusted index increased 8 percent. On an unadjusted basis, the Purchase Index was 22 percent higher than the same week one year ago.
With the disastrous superstorm Sandy bringing down business along the East Coast in late October and early November, activity had nowhere to go but up as the region started to pick up the pieces, explained Mike Fratantoni, VP of research and economics for MBA.
""Following the decrease in applications two weeks ago due to the effects of superstorm Sandy, mortgage applications in many East Coast states rebounded strongly this week,"" Fratantoni said. ""Application volume in New Jersey more than doubled over the week, while volume in Connecticut and New York increased more than 60 percent.""
A drop in fixed mortgage rates also contributed to the pickup in interest, Fratantoni added. The average contract interest rate for a 30-year fixed-rate mortgage with a conforming loan balance fell to 3.52 percent during the week, a record low for the survey.
In a commentary on the data, ""Capital Economics"":http://www.capitaleconomics.com/ property economist Paul Diggle said ""the balance of evidence increasingly suggests that mortgage-dependent buyers are starting to make more of a contribution to the housing recovery.""
There is one conflict over the apparent recovery in demand, however. The ""latest Senior Loan Officer Survey"":https://themreport.com/articles/banks-report-looser-mortgage-standards-increased-demand-2012-11-01 released by the Federal Reserve has 33 percent of lenders reporting stronger demand for home purchase mortgages in the three months leading to October, marking the fifth straight quarter of improved demand. MBA's relatively flat data for mortgage approvals doesn't sit well with the Fed's data.
Diggle offered a few possible explanations for the disparity.
""There are a number of ways to resolve this apparent conflict in the data. For one, it may be that, while lenders are seeing an increase in the number of prospective borrowers coming through the door, few of them make an application once the hurdles of a high credit score and hefty deposit are made clear,"" Diggle said. ""Alternatively, it's possible that, with the Fed survey reported as a percentage balance, a very small increase in mortgage demand observed by lots of lenders is showing up as a strong net balance.""
However, evidence from other sources suggests a lasting pickup in mortgage activity. Fed figures on the value of banks' outstanding residential mortgage assets indicate lending is up by 5 percent year-over-year, and a survey from the National Association of Realtors shows that first-time and repeat homebuyers--most of whom rely on mortgage loans to finance their purchases--accounted for 54 percent of sales in September.
""The upshot is that, while the housing recovery continues to owe a lot to demand from cash-buyers and investors, a modest improvement among mortgage-dependent buyers appears to be underway,"" Diggle concluded.
