Monday, December 10, 2007

Mortgage Rates Lowest Since 2005, Increase in Mortgage Applications Highest Since 2004

Dec. 5 (Bloomberg) -- Mortgage applications in the U.S. jumped last week by the most in more than three years, led by a surge in refinancing as long-term interests rates dropped to two-year lows, according to this press release from the Mortgage Bankers Association (see chart above, 30-year fixed rates are the lowest since mid-October 2005).

The Mortgage Bankers Association's index of applications to buy a home or refinance a loan increased 22.5% to 791.8, the highest level since July 2005. Refinancing surged 32 percent and purchases rose 15 percent.

The biggest drop in 30-year fixed mortgage rates since 2003 may have convinced owners it was a good time to refinance, at a time when outstanding adjustable loans are resetting higher.

Bottom Line: Despite all of the gloom and doom we hear about the mortgage and credit markets (for example, see today's front page WSJ article "U.S. Mortgage Crisis Rivals S&L Meltdown"), reality and the data paint a much brighter picture.


At 12/10/2007 9:22 AM, Anonymous Anonymous said...

"reality and the data paint a much brighter picture"

You mean the reality that you live in and the data you choose to portray.

What irks me about you, Mr. Perry, is your distinctly non-academic approach to economics. You ignore any data that doesn't make your case. You never ask tough questions about the data collection and/or variable definitions behind data that supports your case.

In my opinion, you'd have made a better lawyer than professor.

At 12/10/2007 9:29 AM, Anonymous Anonymous said...


Do you have specific examples or data to bolster your argument? Attacking a person is a weak way to make your point.

At 12/10/2007 10:39 AM, Anonymous Anonymous said...

walt g.,

I'm sure holymoly can give you examples but I will also try by giving specific examples from the same article that Dr. Perry "cherry picked."

And I quote...

"economists have played down the significance of the MBA data because some borrowers are filing more applications after lenders made it tougher to get loans"

Increasingly desperate borrowers and potential borrowers filing multiple applications in a tightening credit market is not necessarily an indication of any improvement.

The survey only includes retail lenders, which have probably seen an increase in business as many wholesale brokers closed their doors following the subprime turmoil.

This survey uses data that isn't even directly comparable to previous data.

Also, the report counts all applications, even those that are ultimately rejected, and some borrowers submit multiple applications.

This is another way of saying that a potential borrower or someone wanting to refinance who submits 10 applications (even to the same lender) would be counted in the survey as 10 applications.

"This looks like it's going to be the deepest correction of any housing correction since World War II, and the question really is, `What's the duration, how long will it be?"

Dang, that sounds potentially serious.

"The Washington-based Mortgage Bankers Association's loan survey, compiled every week since 1990, covers about half of all U.S. retail residential mortgage originations."

The subject survey does not provide complete data and can not be depended upon to draw conclusions about what the market is doing.

At 12/10/2007 1:23 PM, Anonymous Anonymous said...

What about the mortgage delinquency rate rising to a 21 year high for both prime and subprime loans? Seems strong to me!

At 12/10/2007 1:58 PM, Blogger Rick Ballard said...

The MBA puts out a report using the same methodology every week and has done so since 1990. It's really a tough well to poison - unless there is another weekly survey that does provide "complete data" on a weekly basis.

A focus on doomboy analysis may cause one to miss a turn. It isn't as if housing is a want that can be indefinitely postponed.

At 12/10/2007 4:08 PM, Anonymous Anonymous said...

rick ballard, the survey does not include wholesale brokers and an increase in retail broker activities could be due to fewer wholesale brokers being active.

No one is trying to put forth a "doomboy" analysis but when so-called experts leave out important data that doesn't support their goldilocks fantasy some of us like to point that out.

At 12/10/2007 6:22 PM, Blogger Rick Ballard said...

The MBA survey is what it is - it hasn't changed methodology and the Bloombereg article had enough "on the other hand she had a wart" hedging to cover the entire waterfront.

Where might one find a weekly report which includes 100% of the market? Do you think that weathermen in Miami should include caveats concerning the weather in Minneapolis when they make their local weather reports? Just to be "professional" about it?

At 12/10/2007 8:08 PM, Anonymous Anonymous said...

Really appreciate the data you supply on your blog and your clear headed analysis of that data. Keep it up!

At 12/10/2007 11:49 PM, Anonymous Anonymous said...

It will be interesting to see what actually happens. There are so many pundits preaching doom and recession. Anything that looks like good news such as increased exports, low unemployment, strength in many sectors of the economy, etc. is summarily dismissed.

At 12/10/2007 11:59 PM, Anonymous Anonymous said...

Critisize all you want, but cover those shorts by June.


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