US mortgage lending is tumbling

Last night markets appeared to embrace more taper prospect. However the data was not favourable. It is now quite clear that the US mortgage market has turned sharply on the taper inspired spike in bond yields and hence mortgage rates. From the Mortgage Bankers Association:

Mortgage applications decreased 4.7 percent from one week earlier, according to data from the Mortgage Bankers Association’s (MBA) Weekly Mortgage Applications Survey for the week ending August 9, 2013. … The Refinance Index decreased 4 percent from the previous week. The seasonally adjusted Purchase Index decreased 5 percent from one week earlier. … The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($417,500 or less) decreased to 4.56 percent from 4.61 percent, with points decreasing to 0.39 from 0.42 (including the origination fee) for 80 percent loan-to-value ratio (LTV) loans. … The average contract interest rate for 15-year fixed-rate mortgages decreased to 3.60 percent from 3.66 percent, with points decreasing to 0.35 from 0.43 (including the origination fee) for 80 percent LTV loans.

As usual, Calculated Risk has the charts:

MBARefiAug142013
MBAAug142013

Remember that US house prices actually track the refinancing index quite closely so I expect price gains are likely to slow sharply in the not too distant future, slowing consumption as well, although the new construction wave will proceed. Nonetheless, the 30 year bond  is sitting right at the top of its recent range with yields at 3.75%.

Also weighing against any imminent taper were producer prices, which were unchanged on the month and sit at 2.1% year on year.

Rounding out our evening’s data, despite the recent surge in mortgage debt, US households continue to deleverage, according to the Fed:

NYFedQ2
NYFedDQ2

The Fed told us it was going to taper to prevent excessive leverage building up as the cycle accelerated. It is succeeding but growth is not going to accelerate as a result.

 

Comments

  1. Not surprising with 50 million Americans on Food Stamps and the young graduates saddled with $1.2 trillion of student debt leaves fewer punters wanting to sign up for 30 years of debt.
    Nearly 40% of Americans now rent, up 5 % over 2 years.

  2. We are now looking for a house to buy and rent our place we live in. We live in Nashville, Tennessee but want to move to Nolensville, TN ( South of Nashville). The interesting thing is the housing market here has really taking off. The area we are looking at doesnt have nearly as many houses compared to just 1 year ago. The rental market is experiencing a big shortage of rental properties so we wont have a problem renting it for about $1400 – 1500 a month. I think as a whole the US might be experiencing this but if you look at it in different areas that might not be the case. I am hearing that Atlanta is taking off and even Florida is going good. I got family members in real estate in Nashville and this is their slow time of year and they are swamped right now.

    • Get this I can get a 2500-3000 sq ft house in the area we are looking for which s very nice for 250k-275k…. and a big block of land……. can you imagine what this would cost me in Brisbane or Perth…….

  3. ceteris paribus

    The US boom-bust cycle, built on funny money, is truly remarkable.

    It is truly the sharp trader’s paradise and the common man’s purgatory.