US mortgage applications hit 11-year high, homebuilding misses expectations
Mortgage applications by Americans have hit their highest level since 2009 as people rush to take advantage of record low mortgage rates, but homebuilding in the US increased less than expected in May.
Applications for a home loan in the US have surged over the past nine weeks after cratering in early April, according to data from the Mortgage Bankers Association (MBA).
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The cost of taking out a mortgage hit a record low in the week ending 12 June. The interest rate on a 30-year fixed-rate mortgage, the most popular US home loan, dropped to 3.3 per cent in the week ended June 12 from 3.38 per cent the week before, the MBA said.
Mortgage rates have dropped by around half a percentage point from earlier this year after the Federal Reserve cut interest rates to near zero to cushion the blow to the economy from the coronavirus pandemic.
Overall mortgage applications rose eight per cent last week after the drop in lending rates. The MBA’s purchasing index rose 3.5 per cent in the week ending 12 June, hitting its highest level since January 2009 as would-be homeowners rushed to take advantage of cheaper mortgages.
“The housing market continues to experience the release of unrealised pent-up demand from earlier this spring, as well as a gradual improvement in consumer confidence,” said the MBA’s Joel Kan.
While the housing market initially froze as the coronavirus pandemic swept across the US and battered the world’s largest economy, demand for mortgages has held up better than expected.
Low inventory has helped prop up prices in some markets, the MBA said, while many Americans stuck at home are looking to upgrade their homes or even move away from cities.
While demand for mortgages has been more resilient than expected during the pandemic, new figures showed that homebuilding in the US increased less than expected in May.
Housing starts rose 4.3 per cent last month, the Commerce Department said. The rise takes housing starts to a seasonally adjusted annual rate of 974,000 units, leaving most of the decline seen in April — when homebuilding had declined to 934,000 units — intact.
Economists polled by Reuters had forecast 1.095m units for May, and the smaller-than-anticipated rise in points to a slower housing market recovery from the coronavirus crsis.
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While the number of mortgage applications has risen substantially during the pandemic, credit standards have also tightened during the pandemic, meaning that some of the applications for home loans will not be approved.
The MBA said its measure of Americans refinancing their homes rose 10 per cent in the seven days to 12 June, gaining for the second week in a row.