Mortgage Applications, Consumer Credit

Each day the Research staff takes a look at recently released economic indicators, addressing what these indicators mean for REALTORS® and their clients. Today’s update highlights mortgage purchase applications and consumer credit.

• Mortgage applications for refinance activity rose in the past week as mortgage rates continue to remain at historic lows, but applications for home purchases did not change, according to Mortgage Bankers Association.
• Broadly speaking, home purchase applications have been trending sideways throughout the past 18 months.
• One has to be mindful that home sales closings and mortgage applications can diverge, because there is no data on actual approvals of those applications.  In addition, there has been a big increase in all-cash deals in the past 3 years.  A good one-third of home sale transactions have been all-cash, thereby completely bypassing the mortgage process.  Contrary to the sideways movement in mortgage purchase applications, there has been some lift in home sales in the past two months.
• In separate economic data released yesterday, consumers are willing to borrow more in recent months, particularly related to non-revolving credit, such as with student and car loans.  Credit card revolving debt, after having fallen sharply with the economic downturn from 2008, has yet to meaningfully rise.  Though no doubt there are mandatory survival borrowing needs over the economic hard times, many have chosen not to take on additional debt.
• Some upturn in consumer credit implies consumer spending activity will show growth in the upcoming quarters.  But no upturn in credit card debt, though it bodes well for the future of American household finances, implies slower economic growth ahead.  The first quarter GDP growth could barely reach 2 percent, which would be subpar performance.