Could the surge of mortgage loan applications indicate concern that rates are permanently on the rise, sending fence buyers to their lender?
According to the Mortgage Bankers Association (MBA), loan applications increased by 16%, despite climbing rates.
The Federal Reserve reports that mortgage loan rates have increased for the sixth consecutive week with the 30-year fixed rate rising to 3.98%, dangerously close to the 4% hallmark. Shorter term loans, like the 15-year fixed rose to 3.1%, up from 3.03%.
With inventory shrinking and rates increasing, buyers appear to be clamoring for new home purchases, far more now than in recent months. Bloomberg reports that Michelle Meyer, a senior U.S. economist at Bank of America penned a note to clients, writing. “A powerful counter to rising rates is the improvement in expectations about the housing market, as well as low inventory.”
Bloomberg adds that new home sales in May jumped to a three-year high, which may have provided hints to the market’s new direction.
A good number of recent buyers were those who spent several months or years watching and waiting. “You’re seeing improved consumer demand, you’re seeing prices improving and that encourages people on the fence,” Scott Brown, chief economist at Raymond James & Associates told Bloomberg.
Rapid Mortgage Loan Approvals in Demand
A quick mortgage loan approval is also now vital to purchasing a home. Stephen B. McWilliam, president of Florida State Realty Group in Fort Lauderdale, FL told the Sun-Sentinel, "If you can't deliver a loan commitment in under two weeks, you've got a problem."
South Florida buyer Matt Guice told the Sun-Sentinel that he missed opportunities on several properties because other buyers came in with either an all cash deal or a higher bid. Guice only “lucked” into a home when another buyer’s financing fell flat but was told that he could only purchase the home if he closed within three weeks.
Because Guice had already been pre-approved by his lender he was able to meet the seller’s deadline. "That's the only way we could have gotten that done," he told the Sun-Sentinel. "Otherwise the home wouldn't have been ours."
Conventional mortgages through a trusted, local lender can help buyers meet seller deadlines. However, mortgages backed by the Federal Housing Administration (FHA) or the Veterans Administration (VA) can take up to 45 days or more to close, which may put some buyers at somewhat at a disadvantage.
Credit Unions Discuss Mortgage Market Conditions
Last week, reporter Steve Watkins from the Business Courier in Ohio spoke with several credit union CEOs about the mortgage market and found that many had no concerns that rates were going to continue to inflate and that consumers shouldn’t panic their way into a new home.
Rudy Rattman, CEO of AllWealth Federal Credit Union ($14 million, Hamilton, OH) said, “My thought is, we’re stuck in this rate environment for years, and there’s not going to be any end to it soon. We’re battening down the hatches because we think we’ll be stuck in this for the next five to seven years.”
“I think the Fed is intent on not raising rates,” added Art Kremer, CEO of Sharefax Credit Union ($300 million, Batavia, OH).
Continued low rates means that many credit unions are fielding numerous applications. Steve Carle, chief lending officer at the Mid-Hudson Valley Federal Credit Union ($700 million, Kingston, NY) told the Record Online that the credit union had a 13% increase in home loans between January and May as compared to the same time last year. Many buyers are coming to the credit union seeking pre-approval in order to be ready to make an offer when the right home comes on the market.
Read to enter (or re-enter the market)? Find a credit union to begin the mortgage loan pre-approval process today.