let’s talk : MBA Purchase Index

Good morning!

Spring is on the horizon which means – warm weather, pretty flowers, sunshine and… a more active real estate market (hopefully!). How do we know it will be more active? Well, typically the market is more active in the Spring months BUT aside from just guessing and making assumptions we can also take a look at the MBA Purchase index to help us see how potential buyers are truly feeling. Recent data shows that the mortgage application volume is on the rise! This was a statistic that I personally had never tracked before but it was brought to my attention last week at our team meeting. Let’s talk about that.

So as we do, let’s talk Real Estate, let’s talk THE MBA PURCHASE INDEX…

FIRST OFF, WHAT IS THE MBA PURCHASE INDEX?

The MBA Purchase Index is a statistic calculated by the Mortgage Banker’s Association that tracks US home loan applications. 

This index is used by various groups for many different reasons:

Economists and home builders use this index to forecast housing sales.

Lenders track this index to gauge wether or not they are getting enough interest based on their personal office activity.

Investors in mortgage backed securities track this as an indicator for mortgage prepayment.

OKAY GREAT, SO NOW WHAT IS GOING ON WITH THE MORTGAGE MARKET?

Over the past couple of weeks the mortgage application volume has been increasing which is good news for the housing market who had seen a recent slow down over the past 6 months or so. While it is exciting to see an increase in this mortgage application index, it is important to note that the volume is still a bit lower than where we were at this time last year.

WHAT APPEARS TO BE THE MAIN DRIVER FOR THE RISE IN MORTGAGE APPLICATIONS?

Low rates. For now, the bulk of the application increase seems to be concentrated in those applying for new mortgages, but is closely followed by those looking to refinance their existing mortgage as most interest rates are at a 10 month low.  

WHAT KIND OF RATES ARE WE TALKING HERE?

See some of the “average” rates broken out by loan type below:

  • 30 year fixed mortgage rate for loans <$484,350 = ~ 4.66%
  • 30 year fixed mortgage rate for loans >$484,350 = ~ 4.56%
  • 30 year fixed mortgage rate for loans backed by the FHA = ~ 4.68%
  • 15 year fixed mortgage rate = ~ 4.04%
  • 5/1 adjustable-rate mortgages increased 3 basis points to 4%

BUT I AM CONFUSED, I THOUGHT WE HAVE BEEN “WARNED” OVER AND OVER AGAIN THIS YEAR THAT INTEREST RATES ARE ON THE RISE?

Honestly, as I was writing this post, this was a question I could not stop thinking about. I legitimately typed this “blog post” and deleted it a few times because I felt as though I was just interpreting the data incorrectly. SO I did some further digging and found the following…

It appears as though interest rates ARE on the rise, but rates for different products move at different speeds. For example, your savings account interest rate might increase at a different speed than your mortgage interest rates.

So how is that speed determined?

Well, each product relies on a different benchmark. All short term interest rates rely on the fed funds rate while long term rates are based off of the treasury yield.

Banks set their mortgage rates slightly above the yields on 10, 15 and 30 year treasury bonds. 

As a new realtor I am excited to see this rise in applications because the MBA Purchase index tells me that there is potentially an increase buyers out there! As an investor, I feel conflicted; on one hand, I may want to sell a one of my properties if the market values increase but on other hand, if I want to purchase a new property,  I need to be weary of increasing rates.

What do you all think? Do we think this 10 month low will drag on much longer?! Should we scoop up any financing while we can?!

Feel free to comment on the blog post HERE and let us know what YOU think!

Happy Wednesday!
Erin

p.s. we are getting more PERSONAL this year and now have a new Instagram handle – check us out at @erin.home.and.realestate

All data and information provided in this email is for informational purposes only. This email makes no representations as to accuracy, completeness, suitability, or validity of any information and will not be liable for any errors, omissions, or delays in this information or any losses, injuries, or damages arising from its display or use. All information is provided on an as-is basis.

Data Sources for Today’s Content: 

https://www.cnbc.com/2019/02/20/weekly-mortgage-applications-rise-3point6percent.html

https://www.nationalmortgagenews.com/news/mortgage-applications-increase-after-four-weeks-of-declining-volume 

https://www.investopedia.com/terms/m/mba-purchase-index.asp

https://tradingeconomics.com/united-states/mortgage-applications

https://www.thebalance.com/how-are-interest-rates-determined-3306110

https://www.thebalance.com/when-will-interest-rates-go-up-3306125

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