Mortgage Purchase Applications, Labor Productivity

In each Economic Update, the Research staff analyzes recently released economic indicators and addresses what these indicators mean for REALTORS® and their clients. Today’s update discusses mortgage purchase applications and labor productivity.

  • Mortgage applications fell in the past week. Refinance activity weakened as mortgage rates were no longer falling. Applications for home purchase also weakened, contrary to all other data showing a rising home sales trend. The anomaly is partly due to a high percentage of all-cash deals, which do not show up in mortgage data. However, given that cash was also heavy last year,  mortgage purchase applications should be rising. A bit puzzling, this data from the Mortgage Bankers Association.
  • Any meaningful decline in refinance activity will modestly help home sales. That’s because bank staff who have been inundated with refinances can now focus more time on home buyer applications. Mortgage rates will remain attractive for a while, but the likelihood of a further decline in any noticeable way will not occur. By 2013 mortgage rates could be moving higher. By then most of the refinance activity will have completely dried up and businesses for mortgage brokers will principally come from home purchase applications.
  • In separate data, American workers are more productive. Labor productivity rose 2.2 percent, which means that for each hour of work, production increased by an additional 2.2 percent. Better technology, more education, and improved ways of doing business are all reasons for the productivity gains.
  • Productivity rises by 2 percent a year on average while population generally rises by 1 percent. The overall U.S. GDP, therefore, rises by 3 percent a year on average.
  • Some countries at different times had exceptionally strong productivity growth spurts that quickly changed living standards of the affected countries. Germany and Japan, for example, pumped out productivity gains of 5 percent a year for an extended period after the Second World War, thanks partly to the Marshall Plan and U.S. help in drawing up the Japanese Constitution. As a result, Germany and Japan are current global economic powerhouses.

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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