Hot Summer for Housing

NEW YORK (CNBC) -- After holding in lackluster territory for much of the spring season, weekly mortgage applications took a huge jump, signaling that the usual summer slowdown is perhaps, holding off. 

Applications to purchase a home jumped 13% week-to-week, according to the Mortgage Bankers Association, while refinance applications surged just over 19% (both seasonally adjusted). This as the rate on the 30-year fixed mortgage stayed essentially flat at 3.88%, up from 3.87%.

"The increase was accentuated due to the comparison to the week including Memorial Day, but the level of refinance and total market activity is the highest since the spring of 2009," said Michael Fratantoni, MBA's Vice President of Research and Economics. "Refinance volume increased as borrowers were able to lock in at mortgage rates below 4%, and purchase application volume was its highest level in over six months." 

Fratantoni also notes that volume in the government's refinance program for underwater borrowers with Fannie Mae and Freddie Mac loans (HARP), which was expanded in January, has been steady in recent weeks at about 28% of refinance applications.

This week, a new streamline refinance program by the government's mortgage insurer, the FHA, went into effect. That may increase refinance application volume in the weeks to come. 

The refinance share of activity rose to 79% of total applications, from 78% the previous week, according to the MBA.

"When you see this kind of jump, it means demand is very strong," says Paul Miller, head of financial research at FBR. "You only have to talk to a few mortgage guys, to know demand is through the roof out there. We have heard from a few that capacity is very constrained right now, and customers are told to have a lot of patience."

Mortgage applications to buy a home had been declining for the past four weeks, which seemed to signal a slowdown in the market. It is, however, not a perfect reading in this unique market, as anywhere from 20% to 40% of home sales in different markets are to investors using all cash. By Diana Olick, CNBC Real Estate Reporter

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