The Mortgage Bankers Association’s (MBA) latest Weekly Application shows an uptick in applications for the week ending July 3, 2020. The Market Composite Index increased by 2.2% from the previous week on a seasonally adjusted basis and its constituent Purchasing and Refinancing indices increased by 5.3% and 0.4%, respectively. The MBA’s 30-year fixed-rate mortgage rate fell to a new record low of 3.26%, sliding by 4 basis points from the previous week. Refinance applications increased slightly, of which the main contributor was the increase in conventional refinances. Overall refinance activity was up 111 percent from last year on an unadjusted basis.

As was the case in the survey last week, the combination of low housing supply and higher home prices led to another record high this week in the average purchase loan size of $365,700. With the waning of pent-up demand that happened last week owing partly to the resurgence of COVID-19 and continuing decline in mortgage contract rates, a rebound in purchasing is part of the general trajectory of growth in the past couple of months. Interestingly, this week’s purchasing level, on a seasonally adjusted basis, marks the highest level since January 2009.

The purchasing share of mortgage activity increased from the previous week by almost 0.1%. The Purchasing Index’s mild decline in the previous week reflects a relatively lower level with respect to 1990, as indicated in the above figure, but bounced back.

The Federal Reserve Board recently released its Report on the Economic Well-Being of U.S. Households. The report provided results from the responses to the 2019 Survey of Household Economics and Decision making (SHED) which was conducted before the COVID-19 pandemic, as well as the responses to a smaller follow-up survey conducted in April 2020 to better understand the financial disruptions caused by COVID-19. Surveyed items included income, employment, dealing with expenses, banking and credit, housing, education, retirement, student loans, and other education debt.

At the end of 2019, the overall economic well-being has improved since the survey began in 2013. The supplement survey found that financial conditions changed dramatically when the COVID-19 pandemic intensified in March 2020 for many families especially those who experienced job loss or reduced hours.

Fewer adults reported that they were at least “doing okay financially” in April 2020 than they had been at the end of 2019. From March to early April 2020, 19 percent of adults reported losing jobs or having their hours reduced. Seventy-two percent of adults reported “doing okay” (43 percent) or “living comfortably” (29 percent), which is down from 75 percent of adults who were at least “doing okay financially” in 2019.

This sharp decline in financial well-being was concentrated among those who experienced a layoff or reduction in work hours. Among those adults not being affected by the pandemic, 76 percent of adults noted they were at least “doing okay financially” in April, which is similar to overall share of adults “doing okay” in 2019. However, among those who experienced job loss or reduced hours, only 51 percent indicated that they were at least “doing okay” in April.

In addition to employment, work schedule and location may affect financial well-being as well. Working an irregular schedule was often associated with financial strain and working at a job site or at customer’s location could add uncertainty in a worker’s day. Eighty-two percent of adults who worked from home said they were “doing at least okay” financially, while 71 percent of adults who worked at a remote location were “doing at least okay” financially.

The likelihood of being able to work from home varied by education level. Survey found that workers with bachelor’s degree or higher are more likely to work from home, and workers without college education are more likely to work at a remote location (neither their home nor a place that belongs to their employer) (Figure 1). This difference was amplified by social-distancing measures which have been implemented as a response to COVID-19 pandemic.

Though some reported a job loss or a reduction of hours, most workers worked from home due to the COVID-19 lockdown in the April survey. In October 2019, only 7 percent of workers reported usually working from home, while in the last week of March, 53 percent of workers did at least some work from home and 41 percent did all their work from home.

Consistent with previous findings, workers with higher education were more likely to work from home during the COVID-19 pandemic (Figure 2). The supplement survey showed that 63 percent of workers with bachelors’ degree or above worked entirely from home, while 20 percent of workers with high school degree or less worked entirely from home.

After an accelerated pace of layoffs in March and April, construction sector hiring roared back in May, per data from the BLS Job Openings and Labor Turnover Survey (JOLTS).

In May, the hiring rate increased to 9.6%, after a subdued 3.7% rate in April. This was the strongest rate of hiring in the history of the JOLTS data.

The increase in hiring also lifted the open jobs rate to 4.9% in May, with a 365,000 total of open construction sector jobs. The open job count was just 247,000 in April. While growing, the current total represents a year-over-year decline compared to 373,000 in May 2019.

The 30-year fixed-rate mortgage rate has been known to follow, albeit loosely, the 10-year Treasury yield. The latter is a widely tracked economic indicator and serves not only as a sign for the pulse of the U.S. economy, but also as a premium for pricing myriad financial instruments, upon which characteristics specific to the financial instrument are added.

As 10-year Treasury yields continued to hover near record lows in June, the 30-year fixed-rate Mortgage Rate continued to fall moderately in the same period. The below figure indicates that the gap between the two rates was a little shy of 250 basis points in the past four weeks. The volatility in the 10-year Treasury owes to the mixed reaction by the market of the positive news of nonfarm payroll gains offset by persistent unemployment claims.

As the 10-year Treasury yield is a more representative measure of all sectors of the economy, lenders can only keep mortgage rates so far away from it. Nonetheless, the housing market seems to have a clearer sense of direction on the road to economic recovery and leads it, with purchase applications having shown week-to-week gains for two months up through mid-June. Additionally, housing demand is well supported by low interest rates.