Mortgage Refi Activity Plunges To 18 Year Lows (And It's About To Get A Lot Worse)

It appears The Fed's desperate efforts to normalize interest rates (and its balance sheet) before the next recession strikes is reflexively driving a significant part of the economy towards that very end.

As the Mortgage Bankers Association reports, mortgage applications decreased 2.9% from one week earlier.

The Refinance Index decreased 5% from the previous week to its lowest level since December 2000.

The seasonally adjusted Purchase Index decreased 2% from one week earlier.

The unadjusted Purchase Index decreased 3% compared with the previous week and was 2 percent higher than the same week one year ago. ...

The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($453,100 or less) decreased to 4.77 percent from 4.78 percent, with points remaining unchanged at 0.50 (including the origination fee) for 80 percent loan-to-value ratio (LTV) loans.

And given the recent surge in mortgage rates, it's about to get a lot worse...

And it appears Homebuilder stocks are starting to pick up those signals - despite, still near cycle high NAHB optimism...

 

Comments

Pool Shark peopledontwanttruth Wed, 05/30/2018 - 16:50 Permalink

Exactly!

The Housing ATM is now officially tapping-out. This will help trigger the next recession.

In fact, it's worse than that: Despite the recent ridiculous price increases in housing, nearly 1 in 10 homeowners have negative equity, and a shocking 713,000 homeowners owe more than twice what their home is worth.

https://www.bloomberg.com/news/articles/2018-05-29/millions-of-u-s-homeowners-still-under-water-on-mortgages

 

The next housing crash will be epic...

In reply to by peopledontwanttruth

TxExPat The_Juggernaut Wed, 05/30/2018 - 17:20 Permalink

The only time it makes sense (refinancing at a higher rate) is if you have a variable rate loan, and think rates are about to go up sharply.  Bite the bullet, and lock in a fixed rate loan at a slightly higher rate than you are paying now.  Your locking in a higher price than "now", but avoiding a much higher price "later".  Of course, if you had this much sense, you probably didn't have a variable rate loan to begin with...

 

In reply to by The_Juggernaut

An Shrubbery bluskyes Wed, 05/30/2018 - 15:46 Permalink

It's because everybody who is in the habit of pulling cash out of their house to live above their means is tapped out, underwater on their new car loans, student loans, and payday advances.

The sheep are shorn! Nothing left for the banksters and the criminal gubmint gangsters to steal! 

Nothing left to do but start killing them and eating them and tanning their hides.

In reply to by bluskyes

Everybodys All… Wed, 05/30/2018 - 15:46 Permalink

Rates are historically low .... why would someone need to refi if they have entered in at these lows? Most that wanted to refinance their mortgages have done just that over the last ten years.

That said as rates return to higher norms you really don't want to be holding any debt instruments.

The question that needs to be answered is will the Fed lose control of the interest rates if Europe spins out of control and contagion takes affect. I believe most know the Fed will lose that control with the amount of debt held.

3-fingered_chemist Everybodys All… Wed, 05/30/2018 - 16:00 Permalink

The problem isn't necessarily for the homeowners. It's for the banks. Refi activity is a money maker for banks. Lots of fees and money to be made via the skim. If this dries up, so do bank profits which means lower stock values. I do agree that most people have very little incentive to refinance since rates have been so low over the last 10 years that they would have already done so. The only people that are likely to refinance are for cash out purposes given home valuations (but again this is mostly in certain locations). 

In reply to by Everybodys All…

3-fingered_chemist Wed, 05/30/2018 - 15:56 Permalink

Given lack of job security and state and local governments appetite for property tax revenue to pay for the promises they can't fund, it's almost a suckers bet to own a home. People need the freedom to be able to move and move rapidly in today's economy. Renting has its negatives, but I think at this point, they outweigh the positives of home ownership for most people.

Petey4Prez resistedliving Wed, 05/30/2018 - 17:12 Permalink

Public and private corporations are a form of capital. Capital is merely labor stored through stocks, bonds or anything. There is no doubt these companies provide valuable services which people will gladly pay for, but it is obvious I think that as they add to the freedom of choice they also errode their own industry's earning potential. Not to mention nothing they provide can be patented. Competition is fierce and despite the stock price on some of these companies let's not forget they are mortgaged to the hilt! Richest people over generations are usually landed estates. The queen comes to mind.

In reply to by resistedliving

jughead 3-fingered_chemist Wed, 05/30/2018 - 17:03 Permalink

what a bunch of bullshit.  There is no "need to move rapidly" if you have a fucking useful skill. The only people who profit from turning the workforce into a bunch of migrants are you dip shit money-changers who's only skill is making money off the backs of people who actually produce something. My home isn't a fucking ATM...it's a home.  That you fuck sticks don't know the difference is one of the things that is wrong in this formerly decent country. 

In reply to by 3-fingered_chemist

44_shooter Wed, 05/30/2018 - 16:42 Permalink

I remember the 80’s all too well.  My grandparents came into a substantial amount of money in the early 80s and I remember going with them to banks to “invest” their money.  At the time you could get 18% interest on a 10 or 15 year certificate of deposit - and my grandparents (being the financial wizzard folks growing up in the depression) lost most of it trying to play the GST the highest rate game.  Every time they’d pull out they’d lose 10/15% - they squandered most of the money.  But I remember thinking years later when interest rates were much lower just how much they would have had if they just LEFT it in those high rate CDs.

 

Well that stuck with me because I refi’d my house a few times right after we bought it - only taking out small amounts to actually IMPROVE the house and grabbing the lowest interest rate possible.  We have a 30yr  3.675% mortgage - and I’m NEVER going to refi this bitch ever again.  I’ll sell it before I refi it.