TheMReport — News and strategies for the evolving mortgage marketplace.
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40 | M R EP O RT O R I G I NAT I O N S E R V I C I N G DATA G O V E R N M E N T S E C O N DA R Y M A R K E T THE LATEST ORIGINATION Home Purchases Rise in June The rates for all loans closed in June reported a decline, but are lenders looking for a different type of borrower? E llie Mae's June Origination Insight Report revealed interest rates for all closed loans decreased, falling 3.4% from May's 3.43%. As for the 30-year rate on conventional loans, June's data showed that decreased as well, dropping down to 3.42% from May's 3.44% rate. Likewise, loans backed by the Federal Housing Agency (FHA) saw 30-year rates dip in June, down to 3.41% from May's 3.45% rate. Regarding VA loans' 30-year rate, those dropped as well during June, falling all the way down to 3.2% from May's 3.24% rate. Thanks to these declines, the purchase market experienced a boost and rebounding positively. Specifically, the purchase market was responsible for 42% of all closed loans during June, a sta- tistic that rose an impressive 35% from May. Refinances accounted for 58% of all closed loans—down from the prior months' 65%. Noteworthy information also divulged by Ellie Mae included the fact that the window for clos- ing all loans widened (now being 47 days versus May's 45 days). In contrast, the window for closing purchase loans narrowed, down to 46 days from May's 47 days. Regarding refinancing loans, that window for closing widened to 48 days from May's 44 days window. Ellie Mae's report also high- lighted June's FICO scores, which increased on all June loans (to 751 from May's 750). Following suit, FICO scores (month over month) for purchase and refinances across Conventional, FHA, and VA loans also rose. Regarding closing rates, those decreased to 73.4% during June, falling from May's 76%. Jonathan Corr, President and CEO of Ellie Mae, offered his expert insight on the current market: "Interest rates decreased for the sixth consecutive month, and we're seeing a rebound in the purchase market which now represents 42% of all closed loans, a 7% increase from May. Homebuyers are taking advan- tage of these historically low rates to both buy and refinance but it does appear that lenders are looking for borrowers with better credit across all mortgage products as FICO scores have continued to increase across the board since March." Home Sales Surpass Pre-Pandemic Numbers The industry is responding to a "avalanche of applications" for both purchases and refinances. R edfin's report on housing reveals that for the week ending on July 5, home sales rose once more. Specifically, home sales rose by 2% when compared to pre-pandemic home sales. This recovery in the housing market marks the very first time that home sales have surpassed pre-pandemic levels since January and February. According to Redfin, this increased housing demand is due to the low mortgage rates currently available. Freddie Mac's Primary Mortgage Market Survey revealed that mortgage rates fell below 3% for the first time in 50 years, with the rate for a 30-year fixed-rate mortgage falling to 2.98%. These more affordable mortgage rates have brought about greater access to homeownership, thus increasing pending home sales and homebuyer demand. Rob Foos, a Boston-based Redfin mortgage advisor, had weighed in on the current state of housing. "The industry is responding to an avalanche of applications for refinances and purchases. A combination of rock-bottom rates plus pent-up purchase demand has resulted in the highest levels of purchase applications in about a decade," he said. Experts only expect these upticks to continue in an upward trajectory moving forward. Pointing to the fact that pending sales grew 10% from pre-pandemic levels (seasonally adjusted), Redfin tentatively asserts that the market is on its way to recovery. But with the increased buyer demand and still limited supply, bidding wars have heated up, with real estate agents reporting that it has been difficult to keep pace with client demand. Specifically, statistics reveal that the number of U.S. homes available on the market currently is down more than a quarter (28%) from this same time last year. Redfin agents also revealed that this lack of homes for sale on the market has also ushered in a wave of fear from sellers who worry over being able to find a new home of their own once their property closes. Redfin agent Thomas Wiederstein shared his firsthand experience with this phenomenon. "Some of my clients are considering selling, but it's a matter of finding a home they can buy. Even if they do find a home that checks all the boxes, many move-up buyers can't buy a new home before they sell their current one. With bidding wars so common, it's very hard to get an offer accepted that's contingent on the sale of the buyer's current home," he said.