A national home lender based in San Diego is reporting a year filled with superlatives so far in 2020 despite the COVID-19 pandemic thanks largely to falling interest rates and a pent-up demand for housing.
Guild Mortgage with headquarters in Kearny Mesa and 222 branch offices in 30 states reported that lending reached $14.6 billion through June, a 69.5% increase from the same time last year when lending reached $8.6 billion.
For the second quarter of 2020, Guild Mortgage reported a total loan volume of $8.8 billion, a 64% increase over the same period in 2019 from nearly $5.4 billion.
At the end of August, Freddie Mac reported that interest rates on a 30-year fixed-rate mortgage dropped to a national average of 2.91%, down from 3.58% a year ago.
“We’re predicting that rates will stay at their current level through the end of this year and at least for the first quarter of next year and very possibly for the second quarter,” said David Battany, executive vice president of capital markets for Guild Mortgage.
Battany said mortgage rates have reached historic lows because of Federal Reserve action to buy mortgage backed securities.
“We think the Federal Reserve will continue to buy mortgage backed securities until the economy gets close to full employment, which is probably around a 5% unemployment rate. We don’t think we’ll see unemployment get that low until at least the first quarter if not Q2 of next year,” Battany said.
The low rates have sent homeowners scrambling to refinance existing home loans and lock-in loans for new homes.
Guild Mortgage reported that refinancing was up an astounding 326.4% for the first six months of 2020, reaching more than $8 billion compared to nearly $1.9 billion in the first six months of 2019.
Refinancing loans for the second quarter of this year were nearly three times what they were in the second quarter of 2019, totaling $5.1 billion compared to $1.3 billion for Q2 2019.
“It is putting a huge pressure on the industry just to process so many loans.
That’s one of the biggest challenges right now,” Battany said. “There have been prior refinancing cycles but never when rates were this low and so many borrowers are in a position where refinancing would make sense.”
Typically, homeowners refinance when the difference between their existing loan and a new loan is a half percent or more, Battany said.
While there’s been a surge of refinancing Guild Mortgage reported that new home loans reached nearly $6.6 billion for the first half of the year, accounting for nearly half of all loans through the second quarter.
California was among the leading states for the growth this year in Guild Mortgage’s lending through June, reaching nearly $1.6 billion, an 87% increase over last year.
Missouri and South Carolina were the states where the company’s lending grew the most so far this year – up 95% over 2019 – but the amount of lending was lower than in California – $567.6 million in Missouri and $337 million in South Carolina.
Demand for homes – hence home loans — shows no sign of letting up in San Diego.
Zillow, a national online listing and lending agency, reported that as of Aug. 14, pending sales were up 3.3% over the previous week and new listings were up 4.2 percent.
The catch is that the overall inventory of homes on the market in San Diego is 37.8% lower than a year ago.
The result is that homes are being sold faster than ever with the typical home going under contract for sale after eight days on the market – 15 days faster than a year ago, according to Zillow.
The median list price for a home reached $843,400 by mid-August – a 13.5 % increase over August 2019, Zillow reported.