The U.S. housing market is showing signs of being infected by the coronavirus. With more Americans testing positive for COVID-19, the economy crashing, and increasing numbers of shuttered businesses and layoffs, fewer folks are seeking mortgages to purchase homes during this crisis.
The number of home buyers seeking mortgages dropped significantly in the week ending March 20, according to a weekly survey from the Mortgage Bankers Association. Weekly purchase applications fell 14.2% compared with the previous week—and was down 11.2% from the prior year, according to the nonseasonally adjusted numbers.
The survey spans more than 75% of U.S. residential mortgage applications.
This was the first year-over-year decline in home purchase applications in more than three months. The average loan size for home purchases was $336,000.
“Home purchase applications were notably impacted by rising rates and the widespread economic disruption and uncertainty over household employment and incomes,” Joel Kan, associate vice president of economic and industry forecasting for the association, said in a statement.
The number of buyers seeking mortgages plummeted the most in the states hardest-hit by COVID-19. In New York, the epicenter of the pandemic in the U.S., purchase applications fell 35% in the seven days ending March 20 compared with the prior week. And they were down 24% in the week ending March 13 from the previous week.
Weekly purchase applications fell 23% in California and 17% in Washington state in the week ending March 20 compared with the prior seven days.
“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,” Kan said.
Overall, the number of mortgage applications fell 29% compared with the prior week. Weekly refinance applications were down 33.8% but were still up 195% from the same week a year earlier.
Refinances spiked at the beginning of the month, when mortgage interest rates fell to historic lows, reaching a low of 3.13% on March 2 for 30-year fixed-rate loans, according to Mortgage News Daily. Homeowners rushed in to refinance their existing home loans in an effort to pare down their mortgage payments by as much as a few hundred dollars a month and tens of thousands of dollars over the life of their loan. The exact amount varied considerably depending on the rate they received and size of their loans.
Mortgage rates have since fluctuated wildly, reaching 4.15% on March 19 before going back down to 3.5% as of Tuesday, according to Mortgage News Daily. And that’s led to a drop in refinance applications as refinancing isn’t as profitable as it was for homeowners when rates reached new lows.