Homebuyers are coming out of coronavirus isolation and are swarming back into the housing market, lured by falling house prices and some of the lowest mortgage rates ever seen.
A trade group reports that applications for homebuyer mortgages have been rising for weeks and saw a particularly big jump last week.
And though the pandemic is still with us, a major brokerage says demand for homes is now higher than it was before the COVID-19 outbreak.
Homebuyers boost their borrowing
Overall mortgage applications rose 2.7% during the week ending May 22, led by a 9% jump in applications for loans to buy homes, as opposed to refinancing, the Mortgage Bankers Association reported Wednesday.
Demand for so-called purchase loans has grown for six straight weeks and has surged 54% since early April, says Joel Kan, the trade group's associate vice president of forecasting.
"The housing market is continuing its path to recovery as various states reopen, leading to more buyers resuming their home search," Kan says.
Refinancing has slowed but is still sizzling versus last year, as homeowners look to chop their monthly payments and interest costs. The mortgage bankers say refinance requests slipped 0.2% last week but were up a hefty 176% compared to the same week in 2019.
In other words, refi applications were at nearly triple the number lenders were seeing one year ago. Refinances last week accounted for 62.6% of all mortgage applications, down from 64.3% a week earlier
The 2 big reasons buyers are buying
Homebuyers are so motivated that during the week of May 17, demand for houses was 16.5% higher than pre-COVID-19 levels, reports the real estate brokerage Redfin.
"The pandemic has people re-evaluating their lifestyle and their goals. People who were considering a move two or three years down the line are pulling the trigger now," says Tiffany Aquino, a Redfin agent in Virginia, in a news release.
Plus, two big trends are making the housing market more attractive for homebuyers and are reeling them in.
They're being drawn to bargain prices for houses. The U.S. Census Bureau reported this week that new homes sold in April at a median price of $309,900, down 8.6% from a year earlier and down 5.2% from the March median selling price of $326,900.
"A 5% monthly drop in new home prices points to builders eager to make deals," says Zillow economist Matthew Speakman, writing in his blog.
The other major reason Americans are stepping up their homebuying is so they won't miss out as mortgage rates go lower and lower and lower.
Though the Mortgage Bankers Association says its new survey has 30-year fixed-rate mortgages averaging 3.42%, a survey from Mortgage News Daily on Tuesday reported an average rate for those loans of just 3.08%.
And 30-year rates below 3% are already out there — but you have to shop around and know where to look for them.