Low Velocity “Recovery”: Mortgage Purchase Applications DOWN 17.2% YoY, Refi Applications Flat

Mortgage applications returned to their annual post-June pattern of decline last week.

Mortgage applications decreased 3.62% from one week earlier, according to data from the Mortgage Bankers Association’s (MBA) Weekly Mortgage Applications Survey for the week ending July 11, 2014. The previous week’s results included an adjustment for the July 4th holiday.


The non-seasonally adjusted Purchase Index INCREASED 15.63% from the previous 4th of July shortened week. But the Purchase Index NSA is down 17.2% from this time last year.


The seasonally adjusted Purchase Index decreased 7.65% percent from one week earlier to the lowest level since February 2014. The low money velocity economic recovery continues unabated.


The Refinance Index decreased 0.11% from the previous week.


The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($417,000 or less) increased to 4.33% from 4.32%, with points increasing to 0.20 from 0.16 (including the origination fee) for 80 percent loan-to-value ratio (LTV) loans.


I wish someone in the US Senate like Elizabeth Warren (D-MA) had shown Fed Chair Janet Yellen this chart and asked her to comment on it. Rapidly rising house prices, declining/stagnant wages and real household income.


Yellen repeated the famous Leslie Nielsen line from the movie Naked Gun, “Nothing to see here. Please disperse!”


Why The Fed Has Been Unable To Restart The Residential Mortgage Market (Falling/Stagnant Wages)

This morning’s MBA Mortgage Application Indices were released, showing a continuation of stagnant mortgage purchase applications. Even mortgage refinancing applications were almost impervious to recent mortgage rate designs. And The Federal Reserve has been active in terms of lowering The Fed Funds Target rate to almost zero and expanding Treasury and Agency Mortgage-backed Security purchases to over $4 trillion.

And after all that Fed stimulus, here is what we got in return: mortgage market malaise.


Why? Simply because The Fed has not been successful in increasing real median household income sufficiently to generate more qualified borrowers.


As a consequence, The Fed has failed to revive the mortgage purchase application market. Yet house prices have been rising since 2012 thank to the oceans of liquidity and cheap rates for investors to use to bid up house prices.


As the Austrian Emperor Franz Josef said in the film Amadeus, “Well, there it is.