While numbers released Thursday show that new home construction took a dive in March, and it’s likely that housing sales did the same thing, the outlook is much brighter for mortgage refinancings.
Home construction and sales, of course, are suffering from the economic meltdown wrought by the coronavirus pandemic.
Housing starts in the U.S. sank 22.3% last month, the biggest drop since 1984.
But that same economic meltdown has pushed interest rates down to record lows - the 10-year Treasury note recently yielded 0.608%. And, of course, lower rates are a boon for mortgage refinancings, as strapped consumers look for any way they can cut costs.
In a report, mortgage giant Fannie Mae forecast $1.41 trillion of mortgage refinancing originations this year, up a whopping 40% from $1.01 trillion last year.
The Mortgage Bankers Association’s weekly index of home mortgage application volume rose 7.3% last week, and refinancing accounted for 76.2% of mortgage activity. That represents a 10% rise from last week, and a 192% surge from a year ago.
To be sure, there are ways in which the pandemic threatens refinancings, a new Brookings Institution report explained.
“For any mortgage to happen, including a refinance, multiple steps behind the scenes must take place, including: title searches, appraisals, applicant employment and income verification, notarization, closings, and county recordation offices,” the report stated.
“Coronavirus poses new, unforeseen threats. For example, if a county clerk’s recordation office requires filing a physical document for final recordation, and the office is closed, a mortgage cannot become official,” the report from the Brookings Institution added.