U.S. mortgage applications fall as rates push higher: MBA

NEW YORK Wed Aug 21, 2013 7:04am EDT

An empty post where a ''for sale'' sign used to hang is seen outside a home in Brentwood, New York February 10, 2012. REUTERS/Shannon Stapleton

An empty post where a ''for sale'' sign used to hang is seen outside a home in Brentwood, New York February 10, 2012.

Credit: Reuters/Shannon Stapleton

NEW YORK (Reuters) - Applications for U.S. home loans fell for a second straight week and higher interest rates reduced refinancing activity, data from an industry group showed on Wednesday.

The Mortgage Bankers Association said its seasonally adjusted index of mortgage application activity, which includes both refinancing and home purchase demand, fell 4.6 percent in the week ended August 16.

The decline came as 30-year mortgage rates rose 12 basis points to 4.68 percent, matching the year's high first hit in July.

Interest rates spiked in late May after the Federal Reserve signaled it could begin scaling back its $85 billion in monthly bond purchases by the end of the year, with investors now betting it could happen as soon as September.

Prospects of the Fed tapering its stimulus has made financial markets jittery. This week, U.S. benchmark 10-year Treasury yields hit a two-year high of 2.9 percent, more than a percentage point above their level in May.

Demand to refinance existing loans has declined as rates have climbed. The refinance index shed 7.7 percent last week, its biggest weekly fall since late June, and is down 62.1 percent since peaking in the week ending May 3. The refinance share of total mortgage activity slipped to 62 percent from 63 percent the prior week.

Rates remain fairly low by historical standards, however, and the gauge of loan requests for home purchases, a leading indicator of home sales, rose 1.2 percent, after falling 5.4 percent the previous week.

The survey covers over 75 percent of U.S. retail residential mortgage applications, according to MBA.

(Reporting By Steven C. Johnson)

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Comments (4)
dareconomics wrote:
The mainstream media’s housing recovery narrative works thus. Virtually every piece of data is conformed to support a story that the rise in housing prices is a result of the economic recovery and not an unsustainable bubble. In the Reuters article, the author writes:

U.S. home resales rose in July to their highest level in over three years, suggesting a sharp increase in borrowing costs is having only a limited impact on the housing market’s recovery.

There is another way to interpret the data, but since alternate analyses do not conform to the narrative, they are ignored. The chart above shows that mortgage applications and housing sales have diverged from their usual relationship because over 60% of new house purchases are cash deals by speculators, not consumers. How soon the mainstream media forgets that a housing market inflated by speculative activity is a bubble à la 2006.

This article also creates facts to support the narrative. The price gains are attributed to a job market recovery; yet, incomes have yet to recover to their pre-GFC levels for the vast majority of Americans. There is one driver to the housing market today: low interest rates. The rise in rates will surely crimp activity in the future as even the NAR’s shill economist, Lawrence Yun, implies:

Last month, home buyers appeared undeterred by a recent spike in borrowing rates. Indeed, Yun suggested some home buyers might be rushing to make purchases now to avoid further rate increases that are widely expected.

Sales brought forward to beat a rise in interest are sales that will not occur in coming months, but even this expected downturn won’t be enough to derail the narrative.

Full post with charts, images and links:

http://dareconomics.wordpress.com/2013/08/21/around-the-globe-08-21-2013/ ‎

Aug 21, 2013 12:35pm EDT  --  Report as abuse
cjp1959 wrote:
Thanks a lot for raising the interest rates. People were saving money with their lower mortgages, and with the money they save, they have more money to spend (and stimulate the economy with). I am a mobile notary, and I get paid a flat rate to sign loan documents. It’s not much, but it’s what I need. My workload has decreased by 2/3 since July. How would you like your income cut by 2/3 all of a sudden? Homeowners were refinancing to lower their mortgage payment, and with the freed-up cash, they were able to buy more services and goods, which helps to stimulate the economy. Across the nation, notaries, loan officers, title people, processors, and all kinds of people in the loan business will not be losing their jobs. This is a BURDEN on the economy. Tell The-Man-Behind-The-Curtain to stop messing around with a good system. “If it ain’t broke; don’t fix it”. Thanks again for sabotaging thousands and thousands of people across the U.S.

Aug 21, 2013 7:53pm EDT  --  Report as abuse
pfolman wrote:
Raising interest rates will kill off the housing market that just barely started to recover.
I listed my home and since the IR are going up I am barely getting potential buyers in.

But, maybe its all wanted this way and regular people are not supposed to participate in the market, right? !

Aug 22, 2013 2:30am EDT  --  Report as abuse
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