Mortgage Purchase Applications, Producer Price Index

Each day the Research staff takes a look at recently released economic indicators, addressing what these indicators mean for REALTORS® and their clients. Today’s update discusses mortgage purchase applications and the producer price index.

  • The number of people submitting mortgage applications for a home purchase continued to inch higher for the second straight week, with the latest weekly figure rising 10.3 percent.
  • Refinancing activity is picking up as homeowners lock in historically low mortgage rates.
  • Because of excessively tight underwriting standards, about one-third of all recent home sales have been all-cash deals, bypassing the mortgage application process altogether. Therefore,we cannot fully gauge home sales activity just from mortgage data.
  • We should further keep in mind that the mortgage purchase applications data by the Mortgage Bankers Association is a very useful gauge for week-to-week directional trends, but tends to have substantial drifts over a long period of time. From 1990 to 2005, purchase applications quadrupled, while home sales only doubled. From 2005 to today, applications fell by nearly 65 percent while home sales fell by 40 percent.
  • In separate news, inflation pressure is easing a bit. The producer price index declined a notch in December, down 0.1 percent. It is still up 4.8 percent from 12 months ago.  Producer prices had been speeding along at about 7 percent annual gains for most months in 2011, so this slight deceleration is welcome news for producers paying for their products.
  • Consumer prices will be out tomorrow, and if the deceleration trend is affirmed for consumers then the Federal Reserve can delay raising the short term interest rates for a longer period. The Cost of Living Adjustment (CoLA) for social security checks was 3.6 percent for 2012, after receiving no increases in the prior two years. It is likely to be 2 to 3 percent in 2013 based on current inflationary expectations.

Lawrence Yun, PhD., Chief Economist and Senior Vice President

Lawrence Yun is Chief Economist and Senior Vice President of Research at NAR. He directs research activity for the association and regularly provides commentary on real estate market trends for its 1 million REALTOR® members.

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