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Mortgage Applications Re-Plunge As Rates Tick Up 5bps
While the Fed's magical money transmission mechanism in mortgages (and thus housing 'wealth') broke in the middle of last year, this last week's move is a perfect summary of the sensitivity of whatever is left of the recovery. Mortgage rates rose a mere 5bps but this triggered a 7% plunge in refinancing activity. It appears clear from the chart below that, like most other 'markets' the Fed has intervened in, mortgages are broken - rising rates (from any Fed signaling of confidence in the economy or otherwise) will slump refi activity at the margin no matter how rosy the future; and lowering rates is now having no impact at all on the marginal homeowner's ability to refi. That's another fine mess you've got us into Bernanke/Yellen.
Charts: Bloomberg
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That ought to hold the little bastards....
Does Yellen and her gang of crooks really think they can raise interest rates without utterly tanking everything?
They can't buy everything unless they bring the prices down.
It's a bluff. They need to keep the $$ flowin to create asset inflation. "someone like you, makes it hard to live..., without somebody else."
Reason to believe
http://www.youtube.com/watch?v=zyPkJlNP_OU
Nice one. That's a great song but, applying the lyrics in this context, many plusses. "If I listen long enough to you. . . " Aaargh!
Fits like a key. Our experience is all interconnected brother.
More importantly do Yellen and company understand that by keeping rates low they WILL destroy everything. The petro-dollar system, banking as we know it, etc. I think the tank is an acceptable alternative.
well, that and the fact that over 80% of martgages that could be refi'd HAVE BEEN refi'd.
Just TRY and refinance..... bwahaaaaaa
They'll fee you to death in the application process while usina ANY possible excuse NOT to. F**K the banks.
If interest rates have bottomed, Refi could be dead for decades.
If it all ends in a deflationary crash and depression, there may be another round.
Are you trying to say I don't have a future as a RE appraiser
Just a 50 basis point rise in rates will unleash a Tsunami that will be the Mother of all market declines. They are trapped, and they know it. But bullshit costs very little.
"Mortgage rates rose a mere 5bps but this triggered a 7% plunge in refinancing activity."
Really sub-par ZH material. Foolishly conclusionary, as if there isn't a laundry list of economics factors weighing heavily upon the housing market. jmo
i disagree. serial mortgage refi people seem VERY interest rate sensitive. some of them did a new refi with every 25 bp drop for years. if rates so much as stagnate that source of income for the banks is lost as well as cutting off new credit (&/or marginal discretionary wiggle room) to the real eCONoME. zh (to my knowledge) has never been wrong on this issue.
Well, it is interesting how the refinance index tracks the mortgage rate so closely up until 2013, when the negative correlation developed. All else being equal, you'd expect the refinance index and the mortgage rate to be negatively correlated.
Condo building I live in, downtown Chicago or what we hoi poloi call the New East Side, has its own real estate office in the building that handles resales for the 6 condos in the immediate area. Condos sell for between $250 - $2,500K
Place is stocked with 12 commission agents, they sold jack shit during all of March, April and May. June two sales of two crap units for $250.
Median income for the zipcode is $150,000.
You know it's Bad when you see all those "Model Homes Open Now!" signs waving again in the air along the road by some poor schelp in 100 degree weather trying to lure any sucker into the home builders' sales office.
These offices have been seriously quiet these last few weeks.
I've got pictures somewhere of a row of 20 model homes being practiced on by the local fire department taken about three years ago.
I noticed a real drop off in activity from January to the present date.
That's one ugly chart.
I'd want to break it down by region and price.
Exit all financial assets. Let the Fed hold the bag. Convert to FRN and gold... The new diversified portfolio that hedges both deflation and inflation...
Oh I WISH people would do that! It would be perfect...the "economy" that they relentlessly inflated to protect THEIR wealth comes crashing down and only THEY lose! Because this time, everyone else has left the building!
A girl can dream...
Why buy a house when you can get a new Camaro that costs 72k out the door with 84 months financing ! Amatures!
Yeah but it's a Z/28.
Mortgage refinance is what passes for industry in 21st century America. Anyone able to guess where this is leading?
Murika is in socialist bitch mode right now Jackie. I know exactly where this is going.
Applications down? Its just "noise"! Whats the matter with you tyler. the fed knows exactly what its doing, geez.
It might soon become apparent the economic efficiency of credit is beginning to collapse and the additional money poured into the system coupled with lower rates can no longer drive the economy forward. At some point the return on loaning money is simply not worth the risk!
Why do you want to loan money if most likely you will never be repaid or repaid with something that is totally worthless? The collapse of credit can pose major problems such as what we saw when many sellers were forced to demand payment up front before shipping goods in 2008.
When this happens the only safe place to store wealth will be in "tangible assets" and the only lenders will be those who print the money that nobody wants. More on this subject below.
http://brucewilds.blogspot.com/2014/06/the-economic-efficiency-of-credit...