Reading Rates: MBA Application Survey – July 20 2011

The Mortgage Bankers Association (MBA) publishes the results of a weekly applications survey that covers roughly 50 percent of all residential mortgage originations and tracks the average interest rate for 30 year and 15 year fixed rate mortgages as well as the volume of both purchase and refinance applications.

The purchase application index has been highlighted as a particularly important data series as it very broadly captures the demand side of residential real estate for both new and existing home purchases.

The latest data is showing that the average rate for a 30 year fixed rate mortgage declined 1 basis point to 4.54% since last week while the purchase application volume declined 0.1% and the refinance application volume jumped a whopping 23.10% over the same period.

Given that we reached the end of the Feds QE2 intervention, it will be interesting to see how long rates trend in the next few months.

In any event, the purchase application volume remains near the lowest level seen in well over a decade while refinance activity continues to bounce around a bit.

The following chart shows the average interest rate for 30 year and 15 year fixed rate mortgages since 2006 as well as the purchase, refinance and composite loan volumes (click for larger dynamic full-screen version).

New Residential Construction Report: June 2011

Today’s New Residential Construction Report showed increases to both single family permits and starts from last month but a notable decline to permits from last year while starts showed the first (albeit slight) annual increase in thirteen months.

Single family housing permits, the most leading of indicators, increased a slight 0.2% on a month-to-month basis to 407K single family units (SAAR), dropping a notable 3.78% below the level seen in June 2010 and an astonishing 77.36% below the peak in September 2005.

Single family housing starts increased 9.4% to 453K units (SAAR), rising a slight 0.44% above the level seen in June 2010 and a stunning 75.15% below the peak set in early 2006.

With the substantial headwinds of elevated unemployment, epic levels of foreclosure and delinquency, mounting bankruptcies, contracting consumer credit, and falling real wages, an overhang of inventory and still falling home prices, the environment for “organic” home sales remains weak and likely very fragile.

Radar Watching: May 2011

As I have noted in the past, since the home price index data provided by Radar Logic is more timely, unadjusted and un-smoothed it is particularly useful for gaining deeper visibility over our housing markets.

As for the latest trends, it’s important to note that the 25-MSA Composite is continuing to show significant year-over-year declines and after having broken well below the low set in March of 2009 (double-dipping) earlier this year, continues to come off the low as the typical spring transactions begin to mount.

The latest data shows that as of mid-May, prices have declined 5.55% below the level seen in May 2010 while turning up a bit since the lows seen this February.

It will be interesting to see how far the spring buying can push prices but it's important to note that this seasonal factor will likely end in early July (as reported in September) when transactions begin to trail off into the summer months.