Applications for mortgages to buy new homes are still high despite schools reopening to in-person instruction.
This week, Standard & Poor’s released its index for housing prices for the Los Angeles–Long Beach–Anaheim metro area. As a price gauge, this is the best measure available. It uses the analysis developed by Nobel Prize for Economic Sciences Laureate Robert Schiller. And according to that analysis, single family home prices in the Los Angeles metro area in July 2020 were 5.34 percent higher than a year earlier in July 2019. Single family home prices in July 2020 were up 4.25 percent from the beginning of the year.
I have personally been surprised by the apparently very strong continued home buying activity. The Mortgage Bankers Association puts together a series of indices tracking mortgage loan applications, including indices for applications to borrow money to purchase a new home and also for applications to refinance an existing mortgage. According to the Mortgage Bankers Assocation’s so-called Purchasing Index (the index tracking applications for mortgages to buy a new home) data release this week, applications to buy a new home during the last week September were still at very high levels. Indeed, the Sept. 30 reading of 320.9 was only surpassed three times since the beginning of summer.
Most headlines will read that mortgage applications to buy a new home were down about 2 percent from the previous week—which is true. However, what those other commentaries might fail to point out, though, is that mortgage application activity to purchase a new home was at the highest level of the entire year that previous week. So, yes, applications to get financing for a new home are down slightly, but from very high levels and still quite high given that school for many has already started with in-person instruction. It is also surprising now that Thanksgiving is only about seven weeks away. Traditionally, families want to be settled in their new homes well before the traditional fall and winter holidays.
This surprising level of new applications to borrow money to buy a new home points to continued very strong demand.
And since nothing has changed (except higher prices) to allow potential sellers to move out of their current homes, it seems that the current red hot Southern California market for single family homes has continued well past the traditional Labor Day end of the traditional home buying season.
