U.S. Mortgage rates hit a fresh all-time low last week, while purchase applications continued to surge, as the broader economy continues its slow but steady recovery following the worst of the coronavirus pandemic.
The Mortgage Bankers Association said 30-year fixed rates for conforming loan balances of less than $510,400 fell 5 basis point to 3.37% for the week ending May 29, a fresh all-time low that remains a full 1% lower from the same period last year.
The MBA's refinancing index fell 8.6% to 3,166.7 points, extending its slump to a seventh consecutive week, but applications rose for a sixth consecutive week as the seasonally-adjusted Purchase Index increased 5%, pegging its year-on-year gain at 18%.
“The pent-up demand from homebuyers returning to the market continues to support a recovery from the weekly declines observed earlier this spring,” said the MBA's associate vice president of economic and industry forecasting Joel Kan. “However, there are still many households affected by the widespread job loss and current economic downturn. High unemployment and low housing supply may restrain a more meaningful rebound in purchase applications in the coming months.”
“In contrast to the upswing in purchase activity, refinance applications fell for the seventh consecutive week – even as the 30-year fixed rate hit another MBA survey-low of 3.37%," he added. "After reaching a peak of 76 percent earlier this year, refinances now account for less than 60% of activity, and the index is now at its lowest level since February 21.”
U.S. house prices are starting to show some recovery from the worst of the COVID-19 pandemic, with data from the closely-watched S&P CoreLogic Case-Shiller index showing a 4.4% annual increase in March, with markets in Phoenix, Seattle and Charlotte, North Carolina leading the gains.
Craig Lazzara, managing director and global head of index investment strategy at S&P Dow Jones Indices, noted that "housing prices continue to be remarkably stable", adding that "prices rose in each of the 19 cities for which we have reported data, and price increases accelerated in 17 cities.”
The Federal Housing Finance Agency also said Wednesday that U.S. home prices rose 1.7% over the first quarter of the year, and are now 5.7% higher than over the same three-month period in 2019.
Last month, however, the Commerce Department said April housing starts fell 30.2%, the biggest on record, to a seasonally-adjusted rate of 891.000 units, the lowest in five years. Building permits, meanwhile, slumped 20.8% to a five year low of just over 1 million units.