In what may be the first significant sign that coronavirus is chilling the spring homebuying season, applications to refinance or buy a home plunged last week.
Mortgage applications overall dropped 29.4% as compared to a week earlier, according to the Mortgage Bankers Association.
The dip was due in part to rising interest rates. But worries about COVID-19’s impact on the economy also had an impact.
States hit particularly hard by the coronavirus pandemic experienced a notably steep drop in applications. California saw purchase applications drop 23% last week as compared to the week before. New York’s volume plunged 35% and applications in Washington dropped 17%.
“Home purchase applications were notably impacted by rising rates and the widespread economic disruption and uncertainty over household employment and incomes,’’ Joel Kan, MBA’s associate vice president of economic and industry forecasting said in the statement announcing the survey’s results. “Potential home buyers might continue to hold off on buying until there is a slowdown in the spread of the coronavirus and more clarity on the economic outlook.”
For a loan of $510,400 or less, the average interest rate for a fixed 30-year mortgage rose to 3.82%, up from 3.74% a week earlier, and the highest level since mid-January.
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Before that uptick, house hunters and homeowners had been rushing to lock in low interest rates that could significantly shave their monthly mortgage payments. The race to refinance was so fierce, lenders began to raise interest rates to slow the frenzy and give them time to work through a backlog of applications.
Last week, applications to refinance dropped 34% as compared to the week before, according to the MBA’s weekly survey.
The coronavirus has led to widespread layoffs and state mandates that residents stay home, hindering the ability for some to search for or buy a home. And for those continuing to look, the outbreak is leading to other complications, from canceled open houses to lengthier time periods to close a deal.
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