Second quarter 2015 financial results for Wells Fargo and JPMorgan Chase signal a strong rebound in the mortgage market from 2014. This growth was attributed to healthy demand in the home purchase market, based on improving economic conditions, affordable home prices, and continued low interest rates (MarketWatch.com, 7/14/2015):
“It was a strong quarter” for the purchase market, John Shrewsberry, Wells Fargo’s chief financial officer, told analysts on a Tuesday call. “California, New York, Southern Florida, Denver are particular markets where we’ve seen a lot of strength.”
He added that housing was affordable in the second quarter, supporting mortgage applications.
“While home prices have moved, they are still affordable. While rates have moved, they’re still affordable, so that’s helping a lot,” Shrewsberry said. “And we’ve had an improving jobs market which brings more people into eligibility for a purchase or refinancing.”
These financial results follow data released by the Mortgage Bankers Association, showing strong weekly gains in purchase applications, rising to levels not observed in two years, and prompting some economists to predict a continued surge in the market (MarketWatch.com, 7/8/2015):
Some economists say that the housing market is finally ready to ramp up, with sales of both new and used properties running at multiyear highs. The unemployment rate has dropped and hiring is on the rise, factors that will inspire confidence among prospective borrowers to buy homes and banks to make loans.
Rapidly rising home prices are causing some analysts to worry about the beginning of another housing bubble, however, there is some room for comfort since applications are still well below 2005 levels. Lenders should monitor rising home prices, though, and consider this factor, versus recent years, when assessing Fair Lending and CRA risk, as higher prices may crowd out protected groups that cannot afford to purchase new homes.