Prospective homebuyers didn't waste any time in the new year, as through the first full week of 2016, mortgage application volume soared to a high last seen when the leaves were just starting to fall, new numbers reveal.
For the week concluding Jan. 8, mortgage activity increased by more than 21 percent, according to the Mortgage Bankers Association's Weekly Applications Survey. This double-digit uptick takes into account the New Year's holiday, as most days of observance see diminished sales, in the real estate sector and elsewhere.
Though substantial, the 21.3 percent jump wasn't the most appreciable on the year. In October, for instance, mortgage volume topped 25 percent from the previous seven-day stretch, Reuters referenced.
Application flurry fueled by employment growth
Lynn Fisher, MBA's vice president of research and economics, noted that since the Labor Department released job numbers for December – showing that businesses added over 292,000 jobs to the economy – the employment sector appears to be at the root of the mortgage purchase surge.
"Bolstered by strong fourth quarter growth in jobs and continuing low rates, the results are similar to levels we saw in early December, suggesting that the purchase market's strong finish to 2015 may be continuing," Fisher explained. "While refinances also increased on a holiday-adjusted basis, refinance activity was down 38 percent relative to a year ago when rates dove below 4 percent."
Mortgage rates staying low
It's early yet, but mortgage rates in 2016 have been strikingly similar to what was typical in 2015. In only a relative handful of instances, mortgages were at or above 4 percent. Through the second full week of January, 30-year fixed-rate mortgages averaged 3.9 percent, according to lending giant Freddie Mac. That's up from last year's level of 3.6 percent.
Sean Becketti, Freddie Mac's chief economist, pointed to financial market volatility as the reason for the slide in interest rates.
"Turbulence in overseas financial markets is generating a flight-to-quality, which benefits U.S. Treasury securities," said Becketti. "In addition, sagging oil prices are capping inflation expectations. The net effect on the 30-year mortgage rate was a five basis point drop to 3.92 percent."
The glut of oil has affected numerous industries and served as a double-edged sword. With crude oil going for only $30 a barrel, it's forced some industries to layoff workers. For the average consumer, though, it's led to more disposable income, with gas prices at less than $2 a gallon.
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