The bump up in mortgage rates over the last 2 weeks was enough to scare many fence-sitting refinancers and homebuyers into action. New refinance activity soared 20 percent from the previous week. The pace of refinancing was 93% higher than the same time last year. Purchase loan activity jumped 8% from the previous week and is 60% higher than a year ago.
New Home Purchase Activity:
The latest new home sales purchase activity was up 42% compared to December 2019. This is according to the Mortgage Bankers Associations Associate Vice President of Economic and Industry Forecasting. Even though the pandemic continues to impact the economy significantly, home purchase activity remains very strong.
Record demand for housing has put pressure on the available inventory in an unprecedented manner. Current housing inventory hit an all-time low of 1.23 million. This is equivalent to a 2.3-month supply at the current sales pace.
Freddie Mac has issued their 2021 origination forecast and estimates that total mortgage originations will contract nearly 20%. This forecast is significantly less of a decline than the December forecast by the Mortgage Bankers Association.
Inflation surged in December, as indicated by the consumer price index increase of 0.4%. This increase was in line with analyst’s expectations. Although this number is higher than in previous months, The majority of the increase is related to higher gas prices. The overall pace of inflation for the past year was still quite low at only 1.4%. With the continuing challenges of the pandemic, it is unlikely that inflation will grow significantly in 2021