The January’s mortgage application numbers are often skewed by a post-holiday “getting back to business” mindset; the first week after the holiday is always pretty wild. But last week’s report from the Mortgage Bankers Association (MBA) was extraordinary. Instead of settling back into a routine, MBA’s seasonally adjusted Market Composite Index, a measure of the volume of mortgage loan applications, jumped 13.5% from the previous week, the largest one-week gain since early June 2016. This put the index at its highest level in nearly a year.
Both purchase and refinance volumes soared. The Purchase Index, which had been rising steadily since mid-November before suffering the usual holiday battering, resumed its upward trek two weeks ago and rose another 9% last week. It is now at its highest level since April 2010 and is 11% higher than during the same week last year. The Refinancing Index increased 19% to its highest level since last March and the refinance share of activity, which has been as low as 38% in recent weeks, rose to 46.8%.
MBA’s chief economist Mike Fratantoni saw a lot of hope in the numbers which he attributed to lower interest rates. “The spring homebuying season is almost upon us, and if rates stay lower, inventory continues to grow, and the job market maintains its strength, we do expect to see a solid spring market.”
Home builders seemed to have also spotted some signs of spring. The National Association of Home Builders (NAHB) conducts a monthly survey that asks new home builders for their market perceptions. How are current sales, what will they be like in six months, is there a lot of buyer traffic? The resulting index took a real hammering in November and December, losing an aggregate of 12 points. This month the index stabilized, rising 2 points.
NAHB Chairman Randy Noel shares Fratantoni’s optimism. He said, “The gradual decline in mortgage rates in recent weeks helped to sustain builder sentiment. Low unemployment, solid job growth and favorable demographics should support housing demand in the coming months.”
Home sellers have been in the catbird seat for quite a while, but maybe they are losing their perch. Realtor Magazine reports an increase in listings with price cuts in several cities. The actual numbers are small; Charlotte leads the list with reductions in 40% of its listings, followed by San Jose at 10%, San Francisco 7% and LA 5%. However, the year-over-year change is amazing; up 381% and 203% in San Jose and San Francisco, respectively. The magazine also notes that 40% of listings are staying on the market longer, although longer than what is a little unclear.
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