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Takeaway: Following the biggest 1-week drop in mortgage demand in 17 months, this week bounced all of 0.3%. Not the stuff recoveries are made of.

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. 

3Q MORTGAGE DEMAND REMAINS ANEMIC & WHY HPI MATTERS - Compendium 072314

Today's Focus: MBA Mortgage Applications

The Mortgage Bankers Association today released its weekly mortgage applications survey data for the week ended July 17. 

In short, while the market cheered yesterday's Existing Home Sales report for June, the outlook for July offers little excitement. 3Q14TD is tracking down -3.6% QoQ and is down -15.2% YoY.

Why You Should Care:

As a reminder, it's our contention that HPI continues to decelerate through the end of 2014 and potentially well into 1H15. Historically, HPI trends and inflections have correlated strongly with the movement in housing-related equities. Consider the chart below, which shows the YoY rate of growth in HPI in green and the price of the ITB exchange traded fund for homebuilders. 

3Q MORTGAGE DEMAND REMAINS ANEMIC & WHY HPI MATTERS - hpi vs itb

  • Purchase Apps:  Following last week's 7.6% WoW decline - the largest sequential drop since February 2013 - mortgage purchase applications rose +0.3% this week, taking the index reading to 168.3.  For context, average purchase demand over the last two weeks is just 6.5% off the February lows – and the February lows represented a 10Y low in housing demand.  We are currently tracking -15.2% on YoY basis and -3.6% QoQ.  Compares continue to ease from here for YoY purchase demand. 
  • Refi & Rates:  Refi activity rose 4.14% WoW as 30Y rates held flat at 4.33% for a third straight week. Rates have been down on a YoY basis for 5 consecutive weeks and remain just above TTM lows. 

3Q MORTGAGE DEMAND REMAINS ANEMIC & WHY HPI MATTERS - Purchase Index qtrly

3Q MORTGAGE DEMAND REMAINS ANEMIC & WHY HPI MATTERS - Purchase   Refi YoY

3Q MORTGAGE DEMAND REMAINS ANEMIC & WHY HPI MATTERS - Purchase Apps LT   summary stats

3Q MORTGAGE DEMAND REMAINS ANEMIC & WHY HPI MATTERS - Composite Index qtrly

3Q MORTGAGE DEMAND REMAINS ANEMIC & WHY HPI MATTERS - Composite Index LT   summary stats

3Q MORTGAGE DEMAND REMAINS ANEMIC & WHY HPI MATTERS - 30Y FRM

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