Mortgage Purchase Applications

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 highlights mortgage purchase applications.

• Mortgage applications for home purchase declined notably by 8 percent in the past week according to the Mortgage Bankers Association.  Even with the decline, the movements in this data have been mostly sideways (neither consistent rise nor fall) over the past 18 months.
• One has to be mindful that home sales closings and mortgage applications can diverge, because there is no data on actual approvals of those mortgage applications.  In addition, there has been a big increase in all-cash deals in the past 3 years.  A good one-third of home sale transactions have been all-cash, thereby completely bypassing the mortgage process.  Contrary to the sideways movement in mortgage purchase applications, there has been some lift in home sales in the past two months.
• Refinance applications rose a notch.  Mortgage brokers will encounter some upturn in refinance business over the next several months because of a new federal policy to help responsible homeowners tap into low rates even if the homeowner is underwater.  Simply stated, someone with a 6 percent mortgage rate should be able to refinance into the prevailing rate of 4 percent provided that the person has been current on mortgage payments.  But refinance activity is expected to quickly dry up towards the end of the year and into 2013 because the long term interest rates, not directly controlled by the Federal Reserve, will likely rise.  Mortgage business by that time will be mainly from home purchase activity.
• In separate economic data released today, the nation's factory output  stopped growing in January.  Industrial production was unchanged while the capacity utilization rate slid down a notch.  It means that the first quarter GDP growth looks to be subpar at 1.5 to 2.0 percent, and not the 3 or 4 percent associated with a healthier pace.  No economic recession, but no robust expansion either.