A Big Disconnect?
Courtesy of Michael Panzner at Financial Armageddon
This morning, the Mortgage Bankers Association reported its latest weekly data on mortgage applications. Although the headline composite index continued its steady creep higher, applications for the purchase of a home fell sharply, hitting their lowest level since April 1997.
In fact, the persistent decline in the MBA’s purchase index has brought it to the point where it paints a picture that is clearly at odds with what other housing-related data shows. As the accompanying chart suggests, there is a big disconnect between the seasonally-adjusted annual rate of existing home sales, up 27% since November 2008, and purchase-related mortgage applications, down 51% over the span.
Reasons for the divergence might include the fact that fewer home buyers than before are submitting multiple applications (not likely, in my opinion); a greater share of the sales taking place involve cash or investment-type buyers (who normally wouldn’t apply for a residential mortgage); or, many of the reported sales transactions are "nontraditional" — that is, they include foreclosures, short sales, etc.
Whatever the case, the fact that these two trends have gotten so far out of whack after years of moving in synch suggests that conditions in the housing market are anything but normal, and that the outlook for the residential real estate market is more negative than some data would lead us to bellieve.
