47
Journal
PANDEMIC
RIPPLES ROIL
MARKET
AEI's latest housing indicators show the
market may be stabilizing but at a lower level.
For the week of May 4, the purchase loan
rate lock activity was 8% below what it was
during the same week last year. e decline is
less than the average decline of 15% over the
past four weeks.
Also stabilizing is home-price
appreciation, which is nearing 4%—down
from 7.2% during the prior week.
e report also said the COVID-19
pandemic has most negatively impacted
the jumbo market, potential FHA and VA
borrowers with lower credit scores, potential
buyers of investor homes, and the self-
employed.
AEI said cash-out refinancing activity
has "decelerated" from the prior week but
continued to run above the pre-crisis period.
For the week of May 4, the cash-out
refinance was up 23% compared to the prior
week. Annually, the rate of increase has also
slowed, with the week of May 4 posting a
59% increase compared to the 112% rise the
week prior.
e report added that borrowers with
the lowest FICO scores are less able to get
mortgages as lenders are tightening standards.
"e share of borrowers with a score
below 640 has fallen from 10% to 5%. is
tightening of lending standards is appropriate
since the most leveraged borrowers tend to
purchase late in a housing boom and are then
likely to be among the first to default," AEI's
report said. "At the same time, the highest
quality borrowers are beginning to return to
the market."
e share of borrowers with a FICO score
of 770 or higher had decreased from 31% to
28%, but that has bounced back to 31% over
the past few weeks.
However, the number of FHA borrowers
with a credit score below 640 has dropped to
16% from 32%, with the declines being larger
for those with credit scores below 620.
e share of borrowers with a credit score
of 660-689 has increased from 23% to 30%.
