The spring home-selling season has arrived, giving a much needed boost
to the mortgage market. Mortgage applications surged 4.9% from the previous
week, according to the Mortgage Bankers Association's (MBA) seasonally adjusted index. Purchase and
refinance applications both rose in the week ending April 13, marking a
turnaround from recent months of declines as both interest rates and home
prices rose. Refinance applications were up 4% from the week earlier, while
purchase applications rose by 6%.
Meanwhile, mortgage rates held at 4.66% for 30-year fixed-rate
conforming loan balances ($453,100 or less), as points (including origination
fees) increased to 0.38 from 0.31 for loans with an 80% loan-to-value ratio.
Rates for 15-year fixed loans remained at 4.08%, with points dipping to 0.46
from 0.50.
Despite declines in applications in the previous two weeks, a strong job
market and favorable demographics will lead to sustained growth in purchase
volume in the years ahead, says Michael Fratantoni, MBA's chief economist.
"The rapid growth in home prices and the slight increase in rates are
headwinds, but we think the economic and demographic fundamentals will prove
stronger," Fratantoni says. "Beyond that, we are seeing
what looks like typical or better seasonal improvements in homebuyer
demand."
Although interest rates have held steady in recent weeks, they are
expected to rise through the rest of the year. Additionally, rising home prices
and a lack of inventory continue to weigh heavy on buyers' minds. In
March, an online survey released by
Realtor.com found that, among homebuyers across all age groups, 79% and
83% say that rising interest rates and rising home prices, respectively,
will affect their home search. Looking at millennial buyers ages 18 to 34,
those numbers jump to 92% and 93%, respectively. Only 17% and 21% of all
buyers said that rising prices and rates would not affect their home search.
"Existing debt and lower down payments leave younger shoppers more
exposed than others to the impact of rising mortgage rates and record-high home
prices," said Danielle Hale, chief economist for Realtor.com.
"These obstacles won't prevent millennials from finding and buying homes,
but most will have to adapt to these challenging market conditions by adjusting
their home search."
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