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Mortgage Market Heats Up as Refinances Remain High

Mortgage Market Heats Up as Refinances Remain High

Continued optimism prevails throughout the housing market as key indicators point to growth.

The new year began with a bang as the Mortgage Bankers Association reported late last month that purchase applications were up 26%. Earlier last week the group added that both refinances and purchases continue to rise as the seasonally adjusted index of refinance applications increased 3.5% and purchase requests climbed 2.2%.

As applications increased, so did rates. CNBC posted that fixed 30-year mortgage rates averaged 3.73% during the beginning of February, up 6 basis points from 3.67% the prior week.

Industry professionals remain guardedly positive about the news. “This is looking up to be the best year since I joined the business in 2005,” Matt Dubord, builder and co-owner of Dubord Homes told The Evansville Courier Press. “I think the economy is making a turn finally. You look around and there is something going up in every subdivision.”

Credit Unions Are Poised for Rising Purchase Activity

Although the spring home buying season has yet to commence, credit unions throughout the country are gearing up for an increase in overall purchase activity.

“While we generally see more purchase activity as we head into spring, the shift appears more noticeable this year,” says Russ Bernardo, Mortgage Lending Manager at Northwest Community Credit Union ($766 million, Springfield, OR). “ I don’t believe this is a result of rates creeping up; we haven’t received feedback from our members indicating they are concerned about rates rising.”

“Home purchases have increased moderately in our membership area in the last few months,” he adds. “Toward the end of 2012, the applications Northwest Community Credit Union received were heavily skewed towards refinances. Already in January 2013 we’ve seen more movement to new home purchases.”

Steve Donahue, SVP of Mortgage Services at Technology Credit Union ($1.7 billion, San Francisco, CA) says that his credit union has also seen an increase in purchase applications.

“Our purchase activity has increased by approximately 40% in the last few months,” he says. “The number of ‘days on market’ for homes in our area has dropped from 58 days a year ago to 38 days currently. The Bay Area is currently experiencing a shortage of inventory.”

Even though his credit union continues to see mainly mortgage refinance growth, purchase applications are beginning to rise as well, says David Brand, Director of Loan Origination for Hudson Valley Credit Union ($3.6 billion, Poughkeepsie, NY).

“Although 75% of our applications have been for refinances, our purchase volume rose 40% in January, which set a record,” he explains.

Brand says that he anticipates that purchase numbers will continue to rise as more consumers return to the home buying market. “We have budgeted for a 50% growth in purchases for this year, however we’ve yet to see the turn.” Brand adds that he is optimistic that purchases will steadily increase as the springtime home buying season approaches.

In terms of rate fluctuations in the market, Brand says that members have grown accustomed to seeing low rates and may continue to play the waiting game because they believe rates may possibly dive again. “However, if rates start inching up and remain above the 4% mark for a decent amount of time, more consumers may act.”

Growing Confidence and Recovery May be Fueling the Market

Bernardo observes that members who have been on the fence about purchasing a home for the last couple of years are feeling that their situation is more solid.

“People are gaining back confidence in their job situations and as a result are more comfortable making financial changes,” he says. “The market is continuing to improve. We’re seeing a lot of activity in the entry-level housing market while activity in large mortgage loans has remained flat. Higher priced homes have not appeared to regain their pre-recession values, so activity in the higher priced markets hasn’t been as active, and thus we are not seeing as many applications in that price point.”

While moderately priced home purchases are on the rise for Northwest Community Credit Union, Technology Credit Union anticipates growth in higher end home sales. “We are now offering super jumbo loans up to $8 million on adjustable­-rate and $3 million on fixed-rate mortgages,” Donahue says. “Technology Credit Union also offers home equity lines of credit (HELOCs) up to $1 million. With the pickup in the market, we anticipate an increased demand for higher level, super jumbo loans within our membership and in the Bay Area market as a whole.”

Been on the fence, wondering if now is a good time to buy? Find a credit union and discuss your options with a mortgage professional.

By Gina Ragusa
Published February 11, 2013
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