By Peter Ricci
The Purchase Index of the Mortgage Bankers Association’s (MBA) latest Mortgage Applications Survey, which measures purchase activity in the nation’s mortgage markets, increased 3 percent last week from the week before and 26 percent year-over-year, hitting its highest level since May of 2010.
In addition, mortgage applications were up 7 percent, with refinancing activity jumping by 8 percent.
MBA Mortgage Survey – Purchase Activity at Two-Year High
As the MBA noted in its summary of the Mortgage Applications Survey, the increase in purchase activity was significant for two reasons:
- One, it shows that demand for housing continues to outpace typical seasonal declines; though homebuying activity typically slows down in the wintry months, consumers have been uncharacteristically proactive in 2012 and early 2013.
- And two, home purchasing activity has now grown in a steady, natural manner. Purchase activity was strong in May 2010 because of the homebuyer tax credit, which artificially boosted consumer demand for housing – only for that demand, as agents know too well, to collapse as soon as the credit expired. But now, the housing market has naturally reached that level of purchase activity, and will continue to grow beyond that point.
- Also worth mentioning, MBA’s Conventional Purchase Index, which specifically measures the demand for conventional loans, was at its highest level since October 2009.
Mortgage Rates – Still Criminally Low
It should come as no surprise that mortgage rates were still criminally low last week. Though there were minor fluctuations, every major mortgage rate was still extremely appealing at the week’s end, with the 30-year FRM at 3.62 percent, the 15-year FRM at 2.87 percent, and the five and one-year ARM at 2.61 percent.
Frank Nothaft, the vice president and chief economist of Freddie Mac, said in Freddie’s own interest rate report that such low rates will only benefit housing.
“Fixed mortgage rates were up slightly over the holiday week but remain highly affordable and should continue to aid in the ongoing housing recovery. For instance, existing-home sales totaled 4.65 million in 2012, showing a 9.2 percent increase over 2011 and the strongest pace in five years. In addition, the Federal Housing Finance Agency’s purchase-only house price index rose 5.7 percent over the 12 months ending in November 2012, marking the largest annual increase since June 2006.”