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Mortgage Applications Sink To 13 Year Low

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Wed, 07/14/2010 - 08:15 | 467791 jkruffin
jkruffin's picture

Not to mention Complete Euro Collapse in the Making

"Wealthy Europeans in the know have been reducing their holdings of Euros and have moved their money out of Euro zone banks to safe banks in Switzerland. In effect, these are signs of a run on the Euro zone banking system taking place. This movement of capital will intensify and other Euro banks zone deposit holders will be rushing to do the same, this outcome is inevitable given the dire state of the banking system With such an interconnected and leveraged system, no bank in the region can be considered safe. The meltdown will intensify swiftly and without warning as capital in the system reaches critical levels and a number a of institutions experience intense withdrawals from deposit accounts. Since the systemic issues were not resolved and addressed sooner, there appears to be no other possible outcome than the one just described. These are extremely dangerous and volatile times and the situation will soon reach a critical stage and ultimately the banking system will collapse. As a result we would expect to see the EUR/CHF rate to move to 1.10 in short order.

They can play games with the capital requirement rules, but depositors and creditors should know that these institutions are not safe, and current attempts to water down regulations proves that. Many of these banks are insolvent right now. The toxic assets with inflated marks are being permitted to be kept completely hidden by the ECB. Depositors are already fleeing and if anything, this insistence to water down capital requirements should make them head for Swiss or other accounts at an even more urgent pace. This demonstrates just how seriously dire the situation with the Euro zone banks is and how desperate they are to keep this mess from coming to light. Depositors and creditors deserve better than this.

The Euro zone banking system is headed for collapse."

Wed, 07/14/2010 - 08:16 | 467792 HelluvaEngineer
HelluvaEngineer's picture

Sorry, but I don't see any correlation between the tax credit expiration and mortgage demand, and I have a PhD in economics.

Wed, 07/14/2010 - 08:19 | 467797 Dr. Hannibal Lecter
Dr. Hannibal Lecter's picture

My Dear Friend,

You are an idiot.

Warmest regards,


Wed, 07/14/2010 - 08:37 | 467809 IE
IE's picture

I'm pretty sure engineer was being facetious.

Wed, 07/14/2010 - 08:46 | 467821 Boilermaker
Boilermaker's picture

I'm absolutely sure it was oozing with sarcasm.

Wed, 07/14/2010 - 14:35 | 468762 Steaming_Wookie_Doo
Steaming_Wookie_Doo's picture

I had a multiple sarcasm just reading it...

Wed, 07/14/2010 - 08:28 | 467801 willien1derland
willien1derland's picture


Wed, 07/14/2010 - 08:46 | 467824 pan-the-ist
pan-the-ist's picture

The pundits seem more inclined to simply ignore contrary facts and point out the captured / spun data.

Wed, 07/14/2010 - 11:01 | 468107 Ripped Chunk
Ripped Chunk's picture

Oh, I thought you were an engineer.


Wed, 07/14/2010 - 08:16 | 467793 Headbanger
Headbanger's picture

Looks like there's a lot more "price discovery" to be had in housing.. to the downside. Which translates to even lower household wealth and on and on..

Wed, 07/14/2010 - 08:33 | 467806 Rebel
Rebel's picture

Funny thing is that evan as the price of existing homes continues to degrade, the price of building a new home remains the same. Even though there is chaos in the real estate market, the price of a toilet at Home Depot does not come down, and a framer still gets $10 an hour to frame a house. In many areas there is little wiggle room in the actual cost of building a house. So, it appears to me, that in many areas if one were to build a house, the actual cost of building the house would be a lot more than what similar existing houses are selling for in the area (even assuming you act as "contractor" yourself). One would have to think that we have only just begun to see the carnage in unemployment in the construction sector.

Wed, 07/14/2010 - 08:38 | 467814 Edna R. Rider
Edna R. Rider's picture

Rebel, I agree, and my experience is the same.  Our contractor, who has about a hundred "clients" in our New England area, hasn't lowered rates despite his business dropping off by 25%.  He just employs fewer people.  The price of materials goes down (see lumber chart) but the cost of lumber at the HD is virtually the same.  Bernanke has been successful so far in keeping the price of everything the middle class buys WAY too high yet he has no ability to make our contractor friend hire more people or pay higher wages.  We have hit the golden age of being a well-established company where margins improve every quarter a little while revenue goes down a little every quarter and fewer jobs exist every quarter.  At some point even the Wall Street traders will figure this out and end demand will suddenly just dry up.

Wed, 07/14/2010 - 09:08 | 467877 Rebel
Rebel's picture

This is something that happened several years ago, but illustrates how supply/demand does not always drive price. In 2000 some of the things I was working on worked out well, and as a result, I bought an H1 hummer. Loved it, most fun car I ever had. Then about 2005, the price of diesel started really going up, and price of steel was going up at the same time. Since Diesel was getting expensive, and there were starting to be signs of economic distress, the demand for new hummers plummeted. Since demand was less, you would expect supply/demand to drive hummer prices down. However, at the same time the demand was dropping, the price of raw materials used in building hummers was increasing. Hence, hummer could not drop prices. Result was sales plummeted. Where I lived, the dealer was no longer able to sell hummers . . . he could not drop prices, and people would not pay the price he had to sell them at. Result was that he had to close the dealership. When he closed the dealership, I was no longer able to get my H1 serviced. So, I sold it on ebay, to someone in an area that still had a dealer. While I was able to sell the hummer while there was still a reasonable used market, I understand now that hummer was discontinued. This of course creates a big issue with anyone that owns one in finding a qualified mechanic to work on one of these rather unique vehicles.

While this is sort of an extreme example, I think it might serve somewhat as a "leading indicator". Lower demand will not necessarily lower prices for new things being built, if production costs are staying the same, or are increasing. The end result can be items we have enjoyed in the past are simply not available in the future.

In the case of housing, one wonders how many of today's builders will be left standing in 5 years. 

Wed, 07/14/2010 - 10:17 | 468007 PeterSchump
PeterSchump's picture

That's right.  In this type of environment, nothing gets built and there is no investment in productive capacity.  Now start printing $$$$$.  Let's see what happens.

Wed, 07/14/2010 - 12:50 | 468412 Kimo
Kimo's picture

Chinese and friends have taken up the slack in raw material demand.

Wed, 07/14/2010 - 09:57 | 467964 miker
miker's picture

BINGO!  You win the critical observation award.  The key to the Fed's/Treasury's strategy is to NOT let prices fall!  This is critical.  If they start falling, all bets are off as to how far  things will deflate.  The key to holding priceds is OIL!  Note how  oil continues to hold up?  This is not an accident.  Bushee #2 went over to Saudi Arabia twice during the meltdown, ostensibly to ask that oil didn't get too high in price.  That was the press cover.  He really made a personal appeal for the Saudis' to HOLD UP THE PRICE OF OIL via their network and production capabilities. 


Everything we make and use is tied to oil.  If oil drops signficantly, cost structures can drop.  If it hangs up, everyone has their hands tied.  Bernake is giving the suffering the worst possible mix.  By not allowing deflation to occur, he is ensuring consumption will drop because prices can't.

Wed, 07/14/2010 - 11:28 | 468180 Rebel
Rebel's picture

Nice analysis. The problem with their strategy is that you can artificially keep prices propped up, particularly by keeping oil/raw materials prices up, but you can not force people to purchase at those prices. Hence, watch for more manufacturers to go belly up. 

This is bad for those who have tried to be responsible for living within their means, saving, trying to preserve wealth through PMs and so forth. The bottom line might be that even if you preserve wealth, many of the things you would like to have are no longer being made.

Wed, 07/14/2010 - 12:40 | 468391 ElvisDog
ElvisDog's picture

And maintaing oil prices at an elevated level is deflationary, not inflationary. People spend more on oil, they have less to spend on other things. Economic activity decelerates and you have deflation.

Wed, 07/14/2010 - 08:18 | 467794 scatterbrains
scatterbrains's picture

These mortgage brokers push you to lock while not hedging themselves because the consumer protection laws allow clients to jump the rate lock and go to the next lowest offer..  so I guess they don't want to be caught holding the bag. This also means if you lock in low and rates creep back higher in that 30 day period they will find a reason to dump your ass quick... or so these are my suspicions.. any thoughts from guys in the industry ?

Wed, 07/14/2010 - 08:18 | 467795 ZeroPoint
ZeroPoint's picture

IMO, real estate in general needs to take a serious price correction. I offer the the Case-Shiller index as proof. People can't afford housing.



Wed, 07/14/2010 - 08:28 | 467802 HelluvaEngineer
HelluvaEngineer's picture

FWIW, I'm seeing a lot of foreclosures here in the Atlanta area selling for about 1.5x avg salary in the neighborhood.  Yet, the prices continue to decline.

Wed, 07/14/2010 - 08:31 | 467805 ZeroPoint
ZeroPoint's picture

What's the average salary for Atlanta out of curiousity? I also wonder about the demographics of the buyers of those properties. Is it actual families needing a place to live, or developers/investors?

Wed, 07/14/2010 - 08:37 | 467812 HelluvaEngineer
HelluvaEngineer's picture

In the city, there is a huge range.  I'd guess the avg is maybe 45k, but the median is probably much lower.  In the suburbs, it's another story.  The northern counties probably have an avg 75-125k salary, and many of those households are two income.

Wed, 07/14/2010 - 08:46 | 467823 Rogerwilco
Rogerwilco's picture

RE prices in the Atlanta metro area have fallen to depression levels -- 70% declines in some neighborhoods compared to the peak in '07.

Wed, 07/14/2010 - 08:50 | 467835 HelluvaEngineer
HelluvaEngineer's picture

I believe it.  The only people buying right now are value shoppers that have been sitting on cash waiting for this...not a large group.

Wed, 07/14/2010 - 09:23 | 467915 Tortfeasor
Tortfeasor's picture

Atlanta is still massively screwed.  Check out housingtracker.net.  Atlanta has the largest inventory of SFH + Condos of all metro areas in the country.  Higher than NYC or LA, with maybe 10% of the population of LA?

And this doesn't even take into account shadow inventory.  If there's an unnoticed black swan out there, my vote is for Atl housing.  Imagine the carnage if Atlanta went the way of Detroit?  Sherman will look like a community organizer by comparison.

Wed, 07/14/2010 - 12:28 | 468355 Strider52
Strider52's picture

Who in their right mind would buy a house NOW? Very few people can say for sure that they *can't possibly* lose their job. There goes the down payment, and every cent you poured into the house. Vanished.

 I can't shake the feeling, somewhat from reading ZH, but other things as well, that we are very close to something terrible happening. It will not take much to crash this House of Cards.

Disclosure: I own physical PM's, and I keep lots of dry powder. I have guns, lead, a 6-month store of (most) everything, and I rent.

Wed, 07/14/2010 - 08:19 | 467796 Sudden Debt
Sudden Debt's picture

In my country (Belgium) the young people that want to buy a house need to at least deposit 70.000 euro in advance. 2 years ago, they could lend 110%.

And then one wonders why housing goes down...

Wed, 07/14/2010 - 08:47 | 467826 cossack55
cossack55's picture

Any of those nice chalets along the river between Dinant and Namur for sale.  What price?

Wed, 07/14/2010 - 08:20 | 467798 jkruffin
jkruffin's picture

If even at sub-5% rates potential homeowners are not interested, it will take a whole lot of Intel CPU purchases to reverse the double dip in the economy as consumers refuse to purchase that primary bank balance sheet "asset."


It's not so much that they are not interested as their credit is shot and they can't buy a house now.  You can't buy a house without a job like you could in 2008 and prior.

Wed, 07/14/2010 - 08:55 | 467846 economicmorphine
economicmorphine's picture

I agree that their credit is shot but they are also not interested.  Strictly anecdotal, but I and everyone in my circle is playing defense.  We have no large purchases on the horizon.  FWIW, I own my home outright.  No mortgage.  No other debt.  I can borrow.  I have no interest in doing so and may never again.  I'm 50, for what it's worth.

Wed, 07/14/2010 - 09:23 | 467912 Rebel
Rebel's picture

Exactly! Today, the people who CAN borrow are smart enough to NOT borrow.

Wed, 07/14/2010 - 10:53 | 468085 dark pools of soros
dark pools of soros's picture

the credit hose has been crimped.. there are a still a few that have a favorable reason to refi with these interest rates but that will dry up soon

I bought my house last year and it looks like I can get a refi before the eventual double dip in housing prices start to cave.. now is the closest I will ever come to discount window like rates

Wed, 07/14/2010 - 13:32 | 468536 sullymandias
sullymandias's picture

Smart enough not to borrow? I can make a 5 to 1 leveraged bet at less than 5% interest that property values will increase in dollar terms over a 30 year period? Seems like a pretty good bet to me..

Wed, 07/14/2010 - 22:52 | 470086 Rebel
Rebel's picture

You are welcome to borrow. I choose to not be leveraged. Leverage has not worked out too well for a lot of people recently. Leverage requires you to have an assured cash flow to service the debt. In todays environment, nothing is certain. I would not borrow at 0% interest, as I can not be assured I would have the cash flow in the future to service the loan. 

Wed, 07/14/2010 - 12:57 | 468435 ElvisDog
ElvisDog's picture

Bingo. There is (almost) no better feeling than to own your own house in a decent neighborhood. Your worry horizon goes down to almost nothing. If I lose my job, I can pay the bills off of unemployment, which gives me 99 weeks to figure something out. If I was still paying my $2000 per month mortgage that would be anothe story.

Wed, 07/14/2010 - 08:24 | 467799 the not so migh...
the not so mighty maximiza's picture

"it will take a whole lot of Intel CPU purchases to reverse the double dip in the economy as consumers refuse to purchase that primary bank balance sheet "asset."


Nice..they should broadcast this concept with megaphones.

Wed, 07/14/2010 - 08:25 | 467800 jkruffin
jkruffin's picture

HOENIG coming up on CNBC in a minute,  let's see what he has to say before they release retail sales collapse.

Wed, 07/14/2010 - 08:29 | 467803 VK
VK's picture

And the BDI has collapsed once again by 4.5%, 34th day of declines. I'm sure this is bullish for the DOW and Chinese solars.

Wed, 07/14/2010 - 08:30 | 467804 johngaltfla
johngaltfla's picture

This should be good. When will the truth be revealed that has been hidden from the eyes of economists and politicians:

Unemployed people do not buy homes.

People who have had their hours or salary reduced 20-30% do not buy homes.

People with a credit score of 599 or less (25% of the population) should not qualify to buy a home.

Also in the "wow, look what we discovered" category, illegal aliens make horrible credit risks and often abandon the homes they buy, thus they can not buy homes any longer because the banksters finally figure that out, several hundred thousand foreclosures later.

Retirees or soon to be retired folks who lost 30% of their home equity can not sell their existing home to buy a new one.

And my favorite....

Retirees who listened to Bubblevision's experts or their broker who lost 50% of their portfolio from 1999-2010 are having to go back to work at minimum wage bagging groceries (true story here in Florida) just to survive and can not AFFORD to buy a new home, much less sell their old one.

Wed, 07/14/2010 - 08:33 | 467807 Internet Tough Guy
Internet Tough Guy's picture

Call them iHouses and raise the price 500%.

Wed, 07/14/2010 - 08:42 | 467817 willien1derland
willien1derland's picture

+10 - not to mention a Tyler inspired intel powered toaster!

Wed, 07/14/2010 - 08:49 | 467833 CosmoJoe
CosmoJoe's picture


Wed, 07/14/2010 - 08:37 | 467810 willien1derland
willien1derland's picture

Refinance applications accounted for 78.7% of all applications and 78.2% of the prospective loan volume. This is nearly unchanged from last week, when they were 78.7% and 78.2%, respectively. ARM applications accounted for 5.5% of all applications and 10% of prospective loan volume, up from last week's 5.4% and 9.9%, respectively.

Therefore, an inspiring 22% of mortgage applications were associated to home purchases -

Wed, 07/14/2010 - 08:37 | 467811 Sean7k
Sean7k's picture

Housing has two problems IMHO. One, it is still too expensive. Unless the banks allow their inventory to be resolved and at lower prices- the market cannot correct. However, if they do, they become under capitalized and the whole enchilada falls apart. Tough decision!

Two, we became accustomed to building houses with so many bells and whistles, complete with rewriting the building code, that we no longer have the ability to build a "legal" home that is affordable to the many Mcbuyers and their low wage job futures. If these new potential buyers are to ever have a chance at owning a home, we must revisit the building code and make many of it's sections voluntary with a opt out on responsibility from those that choose this route.

Wed, 07/14/2010 - 08:57 | 467853 economicmorphine
economicmorphine's picture

Banks were undercapitalized last year and all it took was an accounting rule change to fix everything.  If banks become undercapitalized again, maybe Dean Wormer could put them on double secret probation.

Wed, 07/14/2010 - 08:40 | 467815 HelluvaEngineer
HelluvaEngineer's picture

Bloomberg radio is now talking about shopping for boots.  OMFG.

Wed, 07/14/2010 - 08:42 | 467818 the not so migh...
the not so mighty maximiza's picture

"If you want a picture of the future, imagine a boot stamping on a human face—forever."

Wed, 07/14/2010 - 08:58 | 467855 economicmorphine
economicmorphine's picture

TThat's so James Taggart, dude.

Wed, 07/14/2010 - 09:07 | 467875 Rusty Shorts
Rusty Shorts's picture

Well, the shit is getting deep you know, might want to invest in some hip-waders.


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