Mortgage Apps Tumble As Rates Spike To 4-Year Highs

A week ago we warned "this won't end well" as mortgage rates started to spike, and this week's mortgage application data suggests it is...

The average 30Y mortgage rate rose 7bps this week to 4.57% - the highest level since January 2014.

And applications are tumbling...

Will higher rates break housing market momentum?

It appears to be impacting the mortgage application pipeline as purchase applications plunged 5.9% MoM - the biggest drop since October and September (impacted by storms).

As the following chart shows, that surge in rates will have a direct impact on home sales (or prices will be forced to adjust lower) as affordability collapses...

Comments

Honest Sam Wed, 02/14/2018 - 12:21 Permalink

Good!  it's about time people are involuntarily stopped from spending ridiculous prices for $500,000 stick construction that costs $160,000 to build.

The insane prices stupid human beans are willing to pay, eating up 60% of their disposable income needs the intervention of higher rates.  If it knocks 30% or more of the potential buyers out of the market, maybe the prices will come down to something that is more affordable for patient buyers willing to wait. 

A crash would be very welcome right about now.
 

 

MoralsAreEssential Honest Sam Wed, 02/14/2018 - 13:18 Permalink

The tax plan is meant to stop some of the hemorrhaging of money from individuals in property taxes passed along in deductions also on Fed taxes which support bloated State governments especially in socialist states.  The house prices keep rising and local governments keep increasing in size and their commitments to free stuff for the growing poor populations.  The stupid Libs vote to provide the free stuff not realizing that they are sucking dry the SOURCE funding it, people who still have decent incomes often themselves.  There is no end to what any government thinks it "needs" and the increased taxes usually fund higher government salaries, bigger, newer government buildings and more perks for government workers.

In reply to by Honest Sam

Dumpster Elite Wed, 02/14/2018 - 12:25 Permalink

I realize that 4.57% is pretty much the End of the World, Armageddon, and the "Moment that Everything Changed"...still trying to figure out how we didn't immediately file for bankruptcy, and eat shotgun barrels, when we took out a construction mortgage with sterling credit, at 8%, back in 1998. At 4.57%, everyone should be jumping out of the highest window they are at presently, and ending it all. It's all over, folks.

MusicIsYou Wed, 02/14/2018 - 12:37 Permalink

I get a laugh from the folks who are so absent minded about the U.S that they think merely a falling dollar can make the U.S a huge exporter again. The U.S will never be an exporter again, because Americans are "poor" in their "Minds" which is why Americans demand a certain standard of living and $25 per hour. And now we've got entitled Millennials who want $25 per hour just to breath. The U.S is not a rich country, a rich country will labor for less, because they have riches in their hearts. The  U.S will never be great again. Americans are poor, and I mean really really poor, that's why Oprah got so popular in the first place.

besnook Wed, 02/14/2018 - 12:41 Permalink

banks have not yet restricted credit like they normally do in a real tightening cycle. you can still buy a car if you have scales for skin as long as you claim to have a job. i don't buy the crash scenario yet. that will come at the tipping point of dollar hegemony. this looks like a correction of a very normal sort, the first since the real estate crash.

so what? mortgage rates are going up. they will go down but 3.5% may be gone forever.

MoralsAreEssential besnook Wed, 02/14/2018 - 13:39 Permalink

According to Armstrong Economics the big shift to Asian/Russian economic superiority will be around 2030.  He said TOD if the 1992 Supreme Court decision re internet taxes is overturned, it will completely crash the US economy because every "tiny" entrepreneur selling crafts and all the other endeavors people are doing to make up income for the part-time gig jobs economy would then have to file all sorts of paperwork every month, etc.  He stated his outfit would have to stop selling to some states and there would again be business flight from the USA. 

In reply to by besnook

Herdee Wed, 02/14/2018 - 12:47 Permalink

They're reducing the money supply and pushing up interest rates. What do you think is going to happen? The Fed is going by a bunch of indicators based on Keynesian quackery. None of it has ever been proven to work, especially during the biggest monetary experiment in history which is hedged by well over a quadrillion/plus of derivatives at a time of record debts worldwide by consumers and governments. Keep an eye on Charles Nenner's cycles, things are changing fast.

itstippy Herdee Wed, 02/14/2018 - 13:36 Permalink

I read Reuters and watch CNN every day and I haven't heard anything like this.  Where do you get these wild ideas?  Are you frequenting those fake news sights?

Lawrence Yun, chief analyst for the National Realtors' Association, is the guy to listen to for housing news.  He's really bright (I think he's Asian) and he has all the data.  He says that mortgage applications are down because there aren't enough houses for sale for people to buy.  If you find a house for sale, make an above-asking offer immediately or lose out.  No matter what you pay now, in ten years it will seem like a terrific bargain.

Unemployment is down, wages are up, the recent tax cuts are a huge boon for the middle class, and it's never been a better time to buy a new home.  Buy now or get priced out forever!

In reply to by Herdee

MusicIsYou Wed, 02/14/2018 - 13:06 Permalink

Another thing I laugh about are all the people who started calling the U.S the American experiment and the money the monetary experiment. No, you thought it was the only way, the absolute greatest. Not until you started getting scared about losing power did you start calling it an experiment. It's over, and so is your hold on power, get used to it.

I Write Code Wed, 02/14/2018 - 13:30 Permalink

Good.  Modest homes out in the valley are blipping down in price already, according to Zillow.  Why, many of them are now below $1m for 1500 square feet on an 8000 foot lot, where the weather is over 100f only about 200 days a year.