Mortgage Applications on the Rise by Gennady Barsky

Mortgage Applications on the Rise

One of the more common pieces of information that the real estate and finance industry monitors closely relates to the number of mortgage applications being applied for. Typically, this data is released on a week by week basis by the Mortgage Bankers Association, and it includes data for both purchases and refinances.

The number of mortgage applications increased sharply by 9.5 percent for the week of March 20, 2015. This includes a 12.3 percent increase in mortgage applications for refinances as well as a 4.9 percent increase for home purchases. Looking forward, it is important to understand what this data means for the industry.

The Cause of the Increase

Home buying efforts tend to increase in the spring and summer months in most locations, but the data that has been released by the Mortgage Bankers Association has been seasonally adjusted.

One of the most significant factors that may be related to this sharp increase in mortgage applications relates to a decline in interest rates.

Some speculate that those who have been on the fence about their home buying or refinancing plans have decided to lock in a low interest rate by applying now.

What This May Mean

Interest rates can drive mortgage applications, and they also can influence home values. Interest rates are projected to increase slowly over the next few years. This may serve as a stabilizing factor for home values, which could in turn slow down the number of refinance applications. In addition, it is important to note that many people will retain a new mortgage for several years before refinancing or moving into a new home.

This essentially means that an increase in mortgage applications now may mean a slowdown in mortgage applications in the future.

The real estate market can be difficult to predict due to the many different factors that all play a role in home values as well as home buyers' and homeowners' interests and goals. Likewise, the mortgage or real estate finance market can also be difficult to speculate on. Factors that range from home values to currency rates and more can influence the mortgage industry.

However, the mortgage applications data is often viewed as being both a leading indicator and a lagging indicator, so it is important to monitor it. While a sharp increase in mortgage applications for one week may be interesting, it is important to continue to monitor the data to determine if trends are developing or solidifying.

Gennady Barsky is a real estate mogul from New York City.