Even after adjusting for the holidays, Mortgage Refinance Activity plunged a steep 22%.

The Mortgage Bankers Association returned from its holiday hiatus today, issuing its first update on mortgage applications’ activity since that for the week ended December 16. The results thus include data for the last two weeks and an adjustment to account for the Christmas holiday.

The Market Composite Index, a measure of application volume, for the week ended December 30 was down 12 percent on a seasonally adjusted basis compared to the December 9 summary. Before the adjustment, the drop in application activity was 48 percent.

The Refinance Index decreased 22 percent from two weeks earlier and the seasonally adjusted Purchase Index declined by 2 percent. The unadjusted Purchase Index was 41 percent lower than the two-week old reading and lost 1 percent when compared to the same week in 2015.

Purchase Applications vs. 30-Year Rates

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Its difficult to say at what point consumers thrown in the towel on new home purchases as a number of factors are in play.

Refinance Window Closing Fast

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Refis show a clear pattern. Only those whose interest rate is above the red dotted line is likely to refi. Given closing costs, it’s only profitable to refi when rates are substantially above the red line.

Bear in mind this data is for a slow holiday period. Nonetheless, refi applications behave as expected.

Three rate hikes in 2017? I don’t think so.

Mike “Mish” Shedlock