Applications for m0rtgages to purchase homes were down 24 percent last week compared with a year earlier, the Mortgage Bankers Association seasonally adjusted index.
Compared with a week earlier, applications were down 11 percent.
There are several factors driving down purchase mortgage applications. The “stay at home” orders in many states and counties bar or severely limit the ability of sellers to show homes to potential buyers, and some sellers are reluctant to allow people into their homes. Open-houses have essentially ceased, and model homes have been shuttered.
First-time homebuyers, who tend to be younger and have lower-incomes, are likely to be delaying a purchase because of uncertainty about job prospects and income. The coordination required between multiple buyers and sellers required for many move-up or downsize sales has been made much more difficult with conflicting rules about gatherings between different localities.
What’s more, some real estate agents report a growing rift on home prices between buyers and sellers, particularly in suburbs near big cities. Buyers see pre-coronavirus prices are too high in light of widespread reports that the U.S. economy is already in a recession. Sellers think demand for homes outside of the big cities is likely to rise as people seek bigger places to shelter during health or other emergencies.
Despite the decline in purchase mortgages, total mortgage application volume was up due to falling interest rates driving up refinancings. Total volume was 67 percent higher than a year ago, reflecting the huge decline in interest rates over the past 12 months. Total applications were up 15.3 percent compared with a week ago.
Applications for refinancings jumped 26 percent for the week and were 168 percent higher than a year ago.
Refinancings will likely remain elevated for some time but may fall if unemployment rises to the extreme levels forecast by many economists. Banks will be reluctant to refinance loans to people who have lost their jobs or whose incomes have fallen.