With this morning's news that the MBA purchase demand index had fallen 10% week-over-week was quite a shocker to many after several weeks of positive outcomes. Did demand to buy houses really drop 10%? We don't think so. There was virtually no inflection on the year-over-year rate of change.This past week was up 20.5% vs. the prior year, which compares with the YoY growth over the preceding three weeks of: 22.6%, 20.3% and 20.7%. In other words, the weakness seems to be stemming from a recurrent seasonal adjustment distortion and not from a bona fide decline in demand.
Our bullish thesis on the housing recovery remains solidly in tact. As home prices rise, so will demand to purchase homes. We're also undergoing a cool down in refinancing activity as rates rise above 3.4% range we saw throughout most of Q4 2012 to 3.64% this week. The future of refi activity is uncertain due to the possibility of a rise in rates and President Obama's plan to help borrowers who are underwater. We'll keep an eye out on this one to see what direction refi heads.