People are refinancing, but they aren't buying homes
Overall, mortgage application volume declined by 18% from the previous week, including both purchases and refinance applications. However, there was a big difference between the two.
Purchase applications declined by 12% from the previous week but were 33% lower than the same week in 2019. On the other hand, refinancing applications dropped by 19% from the week before but are still 144% higher than they were at this time last year.
It certainly makes sense that purchase mortgages are down. The real estate market is minimally active in most parts of the U.S., especially in places hit hard by the COVID-19 pandemic. In fact, purchase applications declined by more than 50% from a year ago in both New York and Washington states, two coronavirus hotspots.
It also makes sense that refinancing is up. After all, you can generally refinance your mortgage without ever leaving your home, and the mortgage rates in the chart above are some of the lowest in history. Since many Americans have tons of newfound time on their hands to shop around for the best refinancing rate, and with many concerned about saving money on expenses, it's not at all surprising that U.S. homeowners are taking advantage.
The Millionacres bottom line
As a final thought, as is common during recessions and other uncertain times, lenders have started to tighten their underwriting standards, especially when it comes to refinancing as the industry struggles to keep up with the high volume of applications. This makes your credit score and ability to document steady income extremely important, so keep this in mind if you're planning to apply.