Mortgage applications rose sharply last week, signaling the highest increase in the past three months. The Mortgage Bankers Association reported that both refinance and purchase applications grew 15.5% during the week of March 4th with the bulk of the applications in the refinance pile.
Refinance applications rose 17.2% and new home purchases were up 12.5%. The last time the industry saw this level of activity was the week of December 10, 2010 and previously on June 11, 2010.
Previous weeks only saw incremental, modest increases with new home mortgage applications rising only an average of 1.2% per week and refinance applications an average of 3.7% per week.
Why the Sudden Increase in Mortgage Applications?
Buyers and homeowners seem to be striking while the iron is hot. As rates began to creep closer to 5%, consumers fell into the notion that the lowest rates were behind them. However, with the 30-year fixed rate mortgage averaging 4.93% (15 year fixed rate mortgages at 4.17%), consumers are flooding their mortgage broker’s offices with applications hoping to refinance or purchase a home at a rate of under 5%.
Economists attribute the burst of activity to a recovering economy. According to Michael Fratantoni, Mortgage Banker’s Association VP/Research and Economics, purchase applications are doing exceptionally well this year.
"Taking into account typical seasonal patterns, purchase applications rose to their highest level of the year last week. On an unadjusted basis, purchase application activity is the highest since last May,” he says. “An improving job market is beginning to pave the way for an improving housing market. Additionally, mortgage interest rates remained below 5% for a second week, maintaining affordability for buyers and leading to an increase in refinance applications."
New purchases continue to be trending toward the West and South, away from the Midwest. Robert Lang, a sociology professor at the University of Nevada-Las Vegas comments, "The geography is clearly shifting, with the West beginning to emerge as America's new heartland. It's a pace-setting region that is dominant in population growth but also as a swing point in American politics."