U.S. Weekly Mortgage ApplicationsJump Higher As Refi's More Than Double

The Mortgage Bankers Association reported another increase in mortgage applications. The 4.7% w/w increase last week pulled them up by nearly three-quarters from the year ago level and to nearly their highest for this year.

Fueled by lower interest rates, the index of applications to refinance a home mortgage again rose. The moderate 3.2% w/w increase pulled them up by more than double the year ago level.

Returning to the 2003 low, the effective interest rate on a conventional 15-year mortgage fell to 4.73% week-to-week. For a 30-year mortgage, rates held near their recent lows at 4.93%. Interest rates on 15- and 30-year mortgages are closely correlated (>90%) with the rate on 10-year Treasury securities. For an adjustable 1-Year mortgage the rate has been fairly stable this year near 6.25% but the rate still was down sharply from the 7.07% peak reached this past Fall.

Mortgage applications for purchase also rose last week, but the 11.5% w/w gain still left them down by one-quarter from last year. Nevertheless, some sign of life in home purchases may be evident in a 25% increase in applications from the absolute lows of this past February. That life, however, has yet to translate into material gains in the home sales figures. Sales of new plus existing single family homes in February only recovered a sharp January decline. They remained near the cycle low and near the lowest since 1997.

During the last ten years there has been a (negative) 79% correlation between the level of applications for purchase and the effective interest rate on a 30-year mortgage.  Moreover, during the last ten years there has been a 61% correlation between the y/y change in purchase applications and the change in new plus existing single family home sales.

The figures for weekly mortgage applications are available in Haver's SURVEYW database.

The Mortgage Bankers Association surveys between 20 to 35 of the top lenders in the U.S. housing industry to derive its refinance, purchase and market indexes. The weekly survey covers roughly 50% of all U.S. residential mortgage applications processed each week by mortgage banks, commercial banks and thrifts. Visit the Mortgage Bankers Association site here. 

Recession or depression? from the Federal Reserve Bank of St. Louis is available here.

Explaining trends in wages, work and occupations from the Federal Reserve Bank of Chicago can be found here. 

The growth rates for German industrial orders are not getting progressively worse, but they still are bad and the three-month growth rate still is worse than the six month growth rate. There may be a hint or whiff of slowing down the pace of the order decline, but it’s a vague hint. Over THREE MONTHS the pace of order decline in real terms is -51.5% led by a 60.2% pace of decline in foreign orders and a lesser but still severe 39.3% pace of decline in new domestic orders.

The pace of order decline in the current quarter annualized is just about the same as the pace in 2008-Q4. Meanwhile real sector sales continue to drop at a steadily accelerating pace. Capital goods declines lead the parade over three-months, six months and twelve months.

These sorts of declines cannot go on for very long without bringing disaster. It is reasonable to think we are on the cusp of seeing a slowdown in the rate of unravel. There are some stimulus programs afoot in Europe. But just as clearly the Euro-view and the ECB view has been to be less helpful than the view from the authorities in the US. In global terms these ‘guys’ are intending to piggy-back a bit on US generated stimulus.

I was shocked to see how blasé Europe really is when Juergen Stark of the ECB was disapproving of the extension of IMF credit. We are in the middle of a real financial and growth problem. And Stark was not pleased to get some help that would be channeled to the neediest. Without this help, recession would hit less developed and smaller nations harder; they would have to wait for the larger economies to pick up in order to benefit. Europe is not doing that every quickly, as we just observed, above. In the case of Europe the biggest risk is in Eastern Europe and there the EU has taken some special steps to provide assistance. This recession has been a good case study in how nations ‘take care of their own’. But the IMF money which is less that way and is geared more toward need without bilateral strings attached is very helpful and timely. I do not share the Stark/ECB reluctance.

For now the German data on industrial orders tell us that Europe is weakening at a rapid pace. German domestic demand may be faring a tad better as it spins off the vaguest hint of slowing its descent. But for foreign orders the assessment for German data remains quite bleak.

UK’s industrial output index fell again making it twelve straight months of decline. There is a slight let up in the pace of decline in IP as the growth rate’s declining profile at the three month tenor shows signs of abating (see chart). Still other trends show that strong downward momentum remains in force.

Consumer durables output accelerated its drop over three-months compared to six months as did intermediate and capital goods industries. Even so, each of these the three-month growth rates for February was stronger than in January. Consumer nondurables industrial output rose in February. Most sectors saw growth rates worsen over three-months compared to six months. Food and drink was an exception; motor vehicles were another exception as growth rates hovered at a horrific -64% annual rate.

The growth rates being posted for the quarter-to-date continue to be very weak and in line with recent trends. Q1 is cropping up to be another bad one.