Posted by Jonathan J. Miller -Saturday, August 27, 2011, 11:52 AM
As I wait to be battered by the impending visit by (Hurricane) Irene and returning from a mini-vacation, but I was struck by the latest results of the latest Mortgage Banker Association seasonally adjusted rate index:
The seasonally adjusted gauge of loan requests for home purchases tumbled 5.7 percent to its lowest level since December 1996, the MBA said. Refinance demand also sagged as interest rates rose, with the refinance index slipping 1.7 percent.
Mortgage rates are at the all-time low, yet mortgage applications are down. Why? Part of the decline is likely because consumers have become jaded with low rates since they have been so low for so long. These are seasonally adjusted numbers so the decline is not due to the typical August slow down.
I feel strongly that the decline in mortgage purchase applications is largely due to the S&P US downgrade of several weeks ago which roiled (my new favorite word) financial markets across the planet. Consumers don’t like the unknown and they are waiting for a sign of better times. It doesn’t mean people aren’t buying homes. What it means is that fewer people are buying homes. If this becomes sustained or rises, lower sales levels will lead to additional price declines.
I think I’ll focus on the weather right now.