Mortgage Purchase Applications Drop to the Lowest Level Since May of 1995

February 22, 2023

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9:39 pm

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17 comments

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Economics

After a short-lived bounce in January mortgage applications renewed their plunge.

Mortgage Bankers Association Purchase Index One Year Chart

*MBA purchase index 10-year chart courtesy of Trading Economics, annotations by Mish*

MBA Press Release Notes

January 04, 2023: Mortgage Applications Decreased Over a Two-Week Period
January 11, 2023: Mortgage Applications Increase
January 18, 2023: Mortgage Applications Increase
January 25, 2023: Mortgage Applications Increase
February 01, 2023: Mortgage Applications Decrease
February 08, 2023: Mortgage Applications Increase
February 15, 2023: Mortgage Applications Decrease
February 22, 2023: Mortgage Applications Decrease

Mortgage News Daily 30-Year Mortgage Rates

Mortgage rates courtesy of Mortgage News Daily

There was a brief but anemic bounce in applications when rates briefly dipped to 6 percent in January.

But rates were mostly range-bound from mid-December to February 2. On December 15, the 30-year MND rate was 6.13 percent. On February 2, the rate briefly fell below 6.00 percent to 5.99 percent.

A longer term chart puts applications into better perspective,

Mortgage Bankers Association Purchase Index 30-Year Chart

*MBA purchase index 30-year chart courtesy of Trading Economics, annotations by Mish*

The MBA purchase index is the lowest since May of 1995.

The problem is not just rates but the nasty combination of rates and price.

Case-Shiller Home Price Index

Case-Shiller home price data via St. Louis Fed, chart by Mish

The housing top is in, but the decline in home prices is weak.

At these mortgage rates, prices would need to decline by about 40 percent, depending on the location, just to return to levels that I would consider very high vs nonsensically high.

How the Fed Messes With People’s Lives From a Mortgage Rate Perspective

I provide examples of how the combination of high prices and high mortgage rates impacts affordability in How the Fed Messes With People’s Lives From a Mortgage Rate Perspective

As long as the Fed sticks with a policy of higher-for-longer, housing will be very weak. And if housing is weak, GDP will be weak as well.

Nonetheless, it’s likely the Fed will stick with higher-for longer out of fears of stirring up inflation.

Also consider Parents Increasingly Move Back In With Their Kids, What’s Going On?

This post originated at MishTalk.Com.

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17 Comments

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xbizo

1 year ago

How many days are homes sitting on the market? My neighbor just sold in one day above asking price. February 20, 2023.

Matt3

1 year ago

I don’t see home prices dropping a lot. Inflation will keep building cost moving higher. I don’t see inflation (real inflation) being less than 3 or 4%. Homes may be dropping in adjusted terms but inflation will keep pushing up prices in unadjusted $.

Wimpy

1 year ago

Is it possible all the boomers have found their forever homes?

Zardoz

1 year ago

Reply to Wimpy

A hole in the ground with a stone on it?

vanderlyn

1 year ago

Reply to Zardoz

i’d like to be just tossed in the sea, and let the creatures do what is natural. my family plot is about 30 paces from a major amerikan war criminal. head of CIA under Raygun. i told my ancestors when they were alive i ain’t spending eternity near that CU*T. in a century or three there will be bonfires and much pissing on his grave from central amerikans progeny…………..

Lisa_Hooker

1 year ago

Reply to vanderlyn

I have decided for a flaming pyre in a boat pushed out to sea.

shamrock

1 year ago

Housing prices haven’t come down that much, yet. Maybe they will, maybe they won’t. Most people can’t afford to sell, not because they are underwater like in 2008, but because they have a mortgage at 3% and a mortgage for a move up home is 6 or 7%. Supply and demand are mutually depressed.

worleyeoe

1 year ago

Reply to shamrock

I tend to agree. Prices have dropped in the super overpriced cities, but most other areas as seeing very slow, gradual declines. Everyone who could really afford to buy a house has. Everyone else has a job and isn’t under financial duress to sell.

But, housing activity is really starting to translate into lower input prices. Lumber is back down to $374 / 1000 bdft. A truss price that I follow on Menards FINALLY fell from $210 to $188 after 12 months. Dimensional lumber prices are way down as are OSB type products. But LVL lumber is still up in the $10-$13 range per foot which is crazy high. Pre-COVID it was about $4. I-joists are still double what they used to be.

I for one hope inflation stays higher than what the Fed expects. 30YFRM needs to stay above 6% for the next 18 months. I think inflation is bottoming and will SLOWLY rise through September. Gas, food costs & rent will lead the way. Will declining corporate profits translate into broad, sustained layoffs?

Finally, the Fed say’s they’re looking for an obvious sign that core PCE inflation is moving unabated towards 2%. I don’t see that happening any time before late this year.

vanderlyn

1 year ago

great article. thanks. i remember buying a place in 1988. top of market. by 1994 it was down huge. sold it for a loss in 2001. eleven long years later. rented it for a loss from 94 to 2001. no buyers to be had as it was a co op. in brooklyn. it was a great learning experience. i sure do believe prices are coming down at least 30 to 40% in most locales over the next couple of years. some places i recently owned as investments i sold out in bay area and phoenix the past year are down big time. bay down 30, phoenix down 15 percent.

8dots

1 year ago

SF & Seattle home buyers used their stocks and stock options as collateral to buy 1M-5M homes. After Satya cashed in, in Nov 22 2021, NDX slumped. Their collateral is severely underwater. The banks own zombie homes. Their assets are intact. No harm is done if the banks freeze the RE market

until NDX move up. The banks, awash with underwater collateral, will cash and escape the tsunami, before it’s too late.

HippyDippy

1 year ago

I remember the 95 time period was when rent began to skyrocket in Valdosta, Georgia. I was in college at the time. The average rent went from the mid 200s to around 700 a month. A lot of the increase had to do with the college becoming a university, but the no money down house buying fad was possibly an even bigger cause. It was a mess for my starving Marvin student budget.

Six000mileyear

1 year ago

It’s an incredible stat for applications to fall to levels well before the Housing bubble started. The next 2-3 months I expect mortgage rates to drift higher before a consolidation for 12 months back to 5%. Driving interest rates is the 4 year cycle nearing a peak. The 60 year cycle is swinging up. Housing prices are going to have to come down at least 25% for the mortgage payment to fit household budgets. This does not automatically mean applications will make a full recovery. Layoffs are still occurring, and 50% of people believe they are worse off. There are still a few economic data holdouts preventing the government from calling a recession.

worleyeoe

1 year ago

“The problem is not just rates but the nasty combination of rates and price.”

I’m not sure about this statement. I think Trump has something to do with falling home sales.

Lisa_Hooker

1 year ago

Reply to worleyeoe

Nah, it’s not Trump’s fault. It must be Putin’s fault.

Zardoz

1 year ago

Reply to worleyeoe

The only thing trump affects anymore is the chances of a GOP president next election… and not in a good way.

Mac Timred

1 year ago

Nice article. But, in the final chart, it looks to me like the line you labeled as Chicago is actually Las Vegas. Chicago did not have a bigger bubble than Vegas in 2007-8.

Lisa_Hooker

1 year ago

Reply to Mac Timred

Mac, you’re right.

I was there.

Mortgage Purchase Applications Drop to the Lowest Level Since May of 1995

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