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This morning, the
Mortgage Bankers Association reported its latest weekly data on mortgage
applications. Although the headline composite index continued its steady
creep higher, applications for the purchase of a home fell sharply, hitting
their lowest level since April 1997.
In fact, the
persistent decline in the MBA's purchase index has brought it to the point
where it paints a picture that is clearly at odds with what other
housing-related data shows. As the accompanying chart suggests, there is a
big disconnect between the seasonally-adjusted annual rate of existing home
sales, up 27% since November 2008, and purchase-related mortgage
applications, down 51% over the span.
Reasons for the
divergence might include the fact that fewer home buyers than before are
submitting multiple applications (not likely, in my opinion); a greater share
of the sales taking place involve cash or investment-type buyers (who
normally wouldn't apply for a residential mortgage); or, many of the reported
sales transactions are "nontraditional" -- that is, they include
foreclosures, short sales, etc.
Whatever the
case, the fact that these two trends have gotten so far out of whack after
years of moving in synch suggests that conditions in the housing market are
anything but normal, and that the outlook for the residential real estate
market is more negative than some data would lead us to bellieve.
Michael
J. Panzner
Editor, Financialarmageddon.com
Michael J. Panzner is a
25-year veteran of the global stock, bond, and currency markets and the author
of Financial Armageddon: Protecting Your Future from Four Impending
Catastrophes, published by Kaplan Publishing.
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