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Takeaway: As expected, the post-holiday bounce was followed by the post-post-holiday slump. Mortgage demand drops sharply on the latest week.

Our Hedgeye Housing Compendium table (below) aspires to present the state of the housing market in a visually-friendly format that takes about 30 seconds to consume.

*Note - to maintain cross-metric comparability, the purchase applications index shown in the table below represents the monthly average as opposed to the most recent weekly data point.

DEMAND DROPS BACK BELOW 180 - Compendium 061814

Today's Focus: MBA Mortgage Applications

The Mortgage Bankers Association today released its weekly mortgage applications survey data for the week ended June 13. 

Mortgage purchase application volume fell -4.7% week-over-week, retracing much of the post-holiday week gain of +9.3% and returning the index to a sub-180 level (178.6, to be precise). On a year-over-year basis, purchase application volume in the latest week is tracking down -15.1% YoY vs -13.6% YoY in the week prior. The QoQ is currently running at +3.4%.

Recall that last week we saw a big bounce in both purchase and refi activity, but we speculated at the time it was at least partially driven by the post-Memorial Day week bounce. As such, this week's activity level is the better gauge. 

Activity dropped off on the refi side as well as the index saw its largest sequential decline since November. Though rates only backed up 2 bps to 4.36% from 4.34%, refi application volume fell +12.7% W/W, more than reversing the +11.0% print in the prior week. 

As a reminder, 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 refi data is largely a reflection of rates on a coincident basis.

Our expectation remains that as we enter the back half of this year and the first half of 2015 we should see growing downward pressure on the rate of home price appreciation.

DEMAND DROPS BACK BELOW 180 - Purchase   Refi YoY

DEMAND DROPS BACK BELOW 180 - Purchase Apps LT w Summary Stats

DEMAND DROPS BACK BELOW 180 - Purchase Apps qtrly

DEMAND DROPS BACK BELOW 180 - Composite Index Qtrly

DEMAND DROPS BACK BELOW 180 - Composite Index LT w Summary Stats

DEMAND DROPS BACK BELOW 180 - 30Y Rate

 

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. 

Frequency:

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

Joshua Steiner, CFA

Christian B. Drake