In May 2021, the market for new home mortgages experienced a month-on-month drop in volume, but with a strong average price per mortgage that reached record levels

The decrease in volume was attributed to the COVID-19 pandemic, which continues to limit in-person activities and create economic uncertainty. Despite this, the total value of new home mortgages increased, allowing homeowners to make larger investments in real estate.

According to data from the Mortgage Bankers Association (MBA), the total amount of new home mortgage applications in May 2021 decreased to 735,000, down 5.9% from the preceding month and 4.5% lower than in the same period last year. Despite this decline, the average home loan amount rose to an all-time high of $387,000, surpassing the previous record set in November 2020. This increase in loan amounts indicates that homeowners are continuing to make substantial investments in real estate, even amid stagnant economic conditions.

The rise in loan amounts was driven by an increase in the purchase of higher-priced properties. The MBA reported that the average loan amount for purchase loans rose 6% month-on-month and 20% year-on-year in May 2021, reaching $399,400. Refinances also experienced a similar climb, increasing 5% month-on-month and 22% year-on-year to $317,000.

The overall quality of borrowers also improved slightly. The average credit score for borrowers rose to 764 in May, up from 762 in April. Additionally, fewer borrowers had late payments on debt obligations, with the delinquency rate declining to 3.7% in May 2021, from 4.0% in April 2021.

These figures suggest that the housing market is continuing to show signs of resilience despite the ongoing effects of the pandemic. Even though the number of new mortgages being issued is decreasing, homeowners are taking advantage of the low-interest rates and making larger investments in real estate. At the same time, lenders are carefully monitoring applicants' credit scores and other financial details, ensuring that only qualified borrowers are granted mortgages.

Overall, the data from the MBA points to a housing market that remains stable in spite of the challenges posed by the pandemic. Despite the drop in volume, homeowners still have access to favorable loan terms and have been able to take out larger amounts when purchasing or refinancing a property. Moreover, lenders have tightened their criteria for approving mortgages, helping to ensure the quality of borrowers is maintained. With the continued rise in loan amounts, it appears that the housing market will remain healthy in the near future.

This article was contributed on Aug 06, 2023