U.S. Mortgage Applications Increase; Interest Rates are Little Changed

The Mortgage Bankers Association reported that its Mortgage Loan Application Index rose 7.3% (67.9% y/y) in the week ended April 10 after the prior week's 17.9% decline. Applications for refinancing increased 10.1% w/w (192.0% y/y) after declining 19.4% in the previous week. Purchase applications dropped 1.8% w/w and by one-third y/y.

The effective interest rate on a 15-year fixed-rate mortgage was fairly steady at 3.11%. The effective interest rate on the 30-year fixed-rate mortgage eased to 3.53% from 3.57%. The effective rate on a 30-year Jumbo mortgage declined to 3.87% from 3.95%. The rate on the 5-year adjustable rate mortgage increased to 3.46% from 3.38%.

The average mortgage loan size fell sharply to $309,900 (-7.0% y/y) from $313,200 in the previous week. The average loan size of refinancings declined to $307,900 (-6.7% y/y) from $312,400. The average loan size for purchases rose slightly to $316,100 (-5.7% y/y) from $315,300, which was the lowest price level since the second week of February 2019.

Home buyers are looking to lock-in currently low levels of interest rates. Applications for fixed-rate loans increased 74.9% y/y, while applications for adjustable rate loans fell 30.4% y/y.

The survey covers over 75% of all U.S. retail residential mortgage applications and has been conducted weekly since 1990. Respondents include mortgage bankers, commercial banks and thrifts. The base period and value for each index is March 16, 1990=100. The figures for weekly mortgage applications and interest rates are available in Haver's SURVEYW database.

The Composite Housing Market Index from the National Association of Home Builders-Wells Fargo fell 2.7% m/m to 72 in March from 74 in February for the third consecutive monthly decline. Still, the index is up 16.1% from a year ago and continues to fluctuate near its highest level in two decades. A reading of 73 had been expected in the INFORMA Global Markets survey. The NAHB figures are seasonally adjusted. Over the past 15 years, there has been a 70% correlation between the y/y change in the home builders index and the y/y change in new plus existing home sales.

The index of present sales conditions declined 2.5% m/m to 79 (+16.2% y/y). The index of expected conditions in the next six months fell 5.1% m/m to 75 (+4.2% y/y), its lowest reading since September. The index measuring traffic of prospective buyers slipped 1.8% m/m to 56 (+27.3% y/y), its second consecutive modest decline from January’s expansion high of 58.

It should be noted that half of the builder responses in the March index were collected prior to March 4, so the recent stock market declines and the rising economic impact of the coronavirus will likely be reflected more in next month’s report. Overall, 21% of builders in the survey reported some disruption in supply due to virus concerns in other countries, notably China. However, the incidence is higher (33%) among builders who responded to the survey after March 6, indicating that this is still an emerging issue.

Regional readings were generally lower in March. The index for the Northeast fell 3.0% m/m to 64. The index for the South declined 3.8% m/m to 76. And the index for the West decreased 3.7% m/m to 79. In contrast, the index for the Midwest increased a solid 6.3% m/m to 67, offsetting a similar decline in February.

The NAHB has compiled the Housing Market Index since 1985. It reflects survey questions which ask builders to rate sales and sales expectations as "good," "fair" or "poor" and traffic as "very high," "average" or "very low." The figures are diffusion indexes with values over 50 indicating a predominance of "good"/"very high" readings. In constructing the composite index, the weights assigned to the individual index components are: 0.5920 for single-family detached sales, present time, 0.1358 for single-family detached sales, next six months, and 0.2722 for traffic of prospective buyers. These data are included in Haver's SURVEYS database.