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Takeaway: Despite falling rates and solid labor market indicators, the demand to buy homes keeps dropping.

Fourth Week of Consecutive Decline in Mortgage Demand - 18x74ymmndzzhjpg 

MBA Mortgage Applications

The Mortgage Bankers Association today released its weekly mortgage applications survey data for the week ended May 30. Mortgage purchase application volume slid further this week dropping another -3.6% week-over-week. This brings the streak of negative sequential prints to four in a row on the purchase side. And while 2Q14 is tracking higher vs 1Q14 by 2.9%, it remains down year-over-year by just over -17%.

Activity cooled off on the refinance side as well. Despite falling rates, refinance application volume has been negative in both of the last two weeks, falling -2.9% this week and -1.4% in the prior week.  

We're more interested in the mortgage purchase volume data as it's the better leading indicator of the direction of housing's momentum, while the refinance data is largely a reflection of rates on a coincident basis.

As the chart below shows, demand recently peaked in 2Q13 and has fallen significantly since. Admittedly, 2Q14 is tracking up vs 1Q14 by 2.9%, but relative to the -19% decline since mid-2013 (and the positive shift in weather) this bounce remains quite minor.

Fourth Week of Consecutive Decline in Mortgage Demand - Purchase   Refi YoY

About MBA Mortgage Applications

The Mortgage Bankers’ Association’s mortgage applications index covers more than 75% of mortgage applications originated through retail and consumer direct channels. It does not include loans delivered through wholesale broker and correspondent channels. The MBA mortgage purchase applications index is considered a leading indicator of single-family home sales and construction. Moreover, it is the only housing index that is released on a weekly basis. 

The MBA Purchase Apps index is released every Wednesday morning at 7 am EST.

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Editor's Note: This is a brief excerpt of a research note that was originally sent to subscribers on June 4, 2014 at 8:33 a.m. EST by by Josh Steiner and Christian Drake from Hedgeye's Financials and Macro teams. Follow Josh & Christian on Twitter @HedgeyeFIG and @HedgeyeUSA.

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