Data Shows Mortgage Market Continuing to Strengthen as COVID Impacts Diminish
Written By: Joel Palmer, Op-Ed Writer
A number of recently released economic and housing reports indicate that the negative impacts of COVID-19 on the housing and mortgage industries is subsiding.
Despite an increase in mortgage rates in March, purchase applications rebounded from a pull back in February, according to economic research by Fannie Mae. The company’s Home Purchase Sentiment Index (HPSI) also rose 5.2 points in March.
Fannie also noted that about 550,000 additional homes were purchased in 2020 by first-time homebuyers using an agency-backed mortgage compared to the pace of recent years. Fannie’s recent report on homebuyer migration patterns using data from Desktop Underwriter revealed that these additional home purchases were disproportionately driven by renters moving out of dense urban areas, a phenomenon its researchers said has continued into early 2021. Much of this trend reflects renters who were planning to purchase a home in the next few years accelerating those plans due to work-from-home options and lower mortgage rates.
A lack of inventory will continue to hinder home purchases for the foreseeable future, Fannie said.
Due to the lack of inventory and other economic factors, home prices will continue to accelerate, Fannie said. This led the GSE to upgrade previous outlooks for the value of purchase mortgage originations. Fannie now expects 2021 and 2022 purchase volumes for the overall mortgage market to total $1.9 trillion for each year, an upward revision of $66 billion and $84 billion, respectively, from last month’s forecast.
Fannie researchers expect refinance origination volume for the single-family mortgage market to be $2.1 trillion in 2021, unchanged from last month’s forecast. Refinance volumes will likely slow as mortgage rates are expected to rise modestly over the next two years.
In another sign that COVID-19’s impacts are waning, Black Knight reported that the national delinquency rate fell from 6 percent in February to 5.02 percent in March. The company noted, however, that delinquencies have fallen by nearly 10 percent on average over the past 20 years, due to tax return and other seasonal funds being used by homeowners to pay down past-due mortgage debt. This year’s decline was 16.4 percent, which may have been buoyed also by government stimulus checks.
As of April 20, there are 2.3 million (4.4% of) mortgage-holders in COVID-19-related forbearance plans, Black Knight reported.
Black Knight also reported that prepayments rose by 17 percent in March to the highest level in more than 17 years driven by a seasonal rise in home sales alongside a rise in refinance activity locked in before rates began to rise in mid-February.
Also last week, the Federal Housing Finance Agency (FHFA) announced that it will retire all of its temporary selling flexibilities on May 31, 2021, due to “low usage.”
These flexibilities included using alternative appraisals and alternative methods of documenting income and verifying employment before loan closing.
“Throughout the COVID-19 pandemic, FHFA has actively monitored the pandemic's impact on mortgage market participants' use of the temporary selling policies. Low usage of the flexibilities make the temporary flexibilities no longer mandatory to ensure efficient market function,” the agency said in its statement.
About the Author
As an NAMP® Opinion Editorial Contributor, Joel Palmer is a freelance writer who spent 10 years as a business and financial reporter and another 10 years in marketing for the insurance and financial services industries. He regularly writes about the mortgage industry, as well as residential and commercial real estate, investments, and retirement income planning. He has also ghostwritten books on starting a business, marketing, and retirement income planning.
