The Mortgage Bankers Association recently released data showing a significant increase in mortgage applications, with a 16.8% surge in the week ending Aug. 9. This jump follows a 6.9% rise in the previous week and marks the largest one-week increase since January 2023. Despite this impressive growth, the average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances remained relatively stable at 6.54%.
One of the standout trends from the data is the surge in refinance activity, which hit its highest level since May 2022. The Refinance Index, which is sensitive to interest rate changes, saw a 35% increase from the previous week and a staggering 118% rise compared to the same week last year. This sharp rise in refinance applications pushed the refinance share of mortgage activity to 48.6% of total applications, up from 41.7% the previous week. Additionally, the share of adjustable-rate mortgage (ARM) applications increased to 7.3% of total applications.
Joel Kan, MBA’s vice president and deputy chief economist, commented on the data, noting that rates on both 30- and 15-year fixed-rate mortgages decreased for the second consecutive week. This, combined with the previous week’s rate movements, spurred another strong week for application activity as borrowers with higher rates took the opportunity to refinance. Kan also highlighted a 3% increase in purchase applications, indicating that prospective homebuyers are gradually returning to the market.
The surge in mortgage activity has had a positive impact on mortgage-linked stocks, with the iShares Residential and Multisector Real Estate ETF REZ rising 0.3% on Wednesday to its highest level since September 2022. The ETF has seen gains for 12 consecutive weeks, achieving its longest winning streak since its launch in 2007. Additionally, the fund has closed in the green 16 out of the last 17 weeks.
Some of the top-performing stocks in the REZ ETF year-to-date include Diversified Healthcare Trust (DHC) with a 310.64% return, National Health Investors, Inc. (NHI) with a 37.44% return, and Welltower Inc. (WELL) with a 33.37% return. These stocks have benefited from the recent surge in mortgage activity and the overall positive trend in the real estate market.
Overall, the recent spike in mortgage applications and refinance activity is a positive sign for the housing market and the economy as a whole. With interest rates remaining relatively stable and prospective homebuyers showing increased interest, the real estate sector is poised for continued growth in the coming months.