Mortgage Applications Plunge: Composite Down 9.5%, Refinance Index Down 11.4%, Lowest Since July 2009

The patently obvious deterioration in housing just took one big step for the worse, after the Mortgage Banker Association reported that the Market Composite Index, a measure of mortgage loan application volume, decreased 9.5 percent on a seasonally adjusted basis from one week earlier. The Refinance Index decreased 11.4 percent from the previous week and is the lowest Refinance Index recorded in the survey since the week ending July 3, 2009. The seasonally adjusted Purchase Index decreased 5.9 percent from one week earlier. And for the obligatory quote that confirms that Ben Bernanke's plan to fix the economy by raising rates or something, is about to blow up: "Mortgage rates remained above 5 percent last week, up almost a full percentage point from their October lows, and refinance volume continued to drop," said Michael Fratantoni, MBA's Vice President of Research and Economics. "Applications for home purchases also declined on a seasonally adjusted basis.  Buyers have not returned to the market as rising rates have reduced affordability, to some extent." Bottom line: few people care to refinance (which is also making the QE Lite component of QE redundant), and even fewer people want to buy homes. So, again, what recovery?

From the MBA:

The four week moving average for the seasonally adjusted Market Index is down 4.5 percent.  The four week moving average is down 1.9 percent for the seasonally adjusted Purchase Index, while this average is down 6.2 percent for the Refinance Index.

The refinance share of mortgage activity decreased to 64.0 percent of total applications from 66.6 percent the previous week. This is the fourth straight week the share has declined. The adjustable-rate mortgage (ARM) share of activity increased to 6.0 percent from 5.9 percent of total applications from the previous week.

The average contract interest rate for 30-year fixed-rate mortgages decreased to 5.12 percent from 5.13 percent, with points increasing to 0.85 from 0.84 (including the origination fee) for 80 percent loan-to-value (LTV) ratio loans.  The effective rate also decreased from last week.

The average contract interest rate for 15-year fixed-rate mortgages increased to 4.34 percent from 4.29 percent, with points decreasing to 0.85 from 1.02 (including the origination fee) for 80 percent LTV loans. This is the highest contract 15-year rate observed in the survey since April 2010.  The effective rate also increased from last week.

We can't wait for Great Comrade and Wonderful Central Planner Bernank's explanation of why this collapse in refinancing activity is actually precisely as planned.

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