- Mortgage applications fell 29.4% last week.
- That’s the housing market’s biggest decline since 2009.
- Meanwhile, distressed mortgage REITs can’t cover margin calls.
Mortgage applications cratered last week in another perilous sign for the housing market.
According to the Mortgage Bankers Association (MBA), new mortgage applications plummeted 29.4% for the week ending March 20, 2020. That’s a breakneck acceleration in mortgage application declines on top of the 8.4% drop in the week prior.
In a statement, MBA executive Joel Kan said:
Home purchase applications were notably impacted by rising rates and the widespread economic disruption and uncertainty over household employment and incomes.
The MBA data revealed a correlation between the housing market swoon and COVID-19. New mortgage applications fell off sharply in states hit worst by coronavirus. For example, New York, California and Oregon.
Coronavirus Gums Up Housing Market Rates
Interestingly, interest rates in the housing market are rising despite an ultra-low rate macro environment. The Federal Reserve slashed the federal funds target to 0% this month and is pumping trillions of dollars into the financial system.
But the average fixed 30-year interest rate for mortgages rose 8 basis points to 3.82%. That’s the highest mortgage rate we’ve seen since the week ending Jan 17.
According to Kan, housing market rates are rising because of volatility and coronavirus-related backlogs:
The 30-year fixed mortgage rate reached its highest level since mid-January last week, even as Treasury yields remained at relatively low levels. Several factors pushed rates higher, including increased secondary market volatility, lenders grappling with capacity issues and backlogs in their pipelines, and remote work staffing challenges.
The free fall in new mortgage applications is the worst since the housing market crashed over a decade ago. Falling demand due to coronavirus fears and recessionary financial stress…