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 discusses mortgage applications and the purchase index.

  • Mortgage applications—an indicator of housing purchases—declined 10 percent during the week ending November 11, after a 10 percent jump the previous week.
  • A big driver of the overall index, refinance loan applications were down 12 percent after increasing 12 percent the week before.
  • The Purchase Index—the index that directly affects home sales—slipped 2.3 percent from after increasing in the preceding 3 weeks. Interest rates on 30-year fixed mortgages moved up to 4.23 percent from 4.22 percent the week before.
  • This mortgage application data is not an indicator of cash purchases – which have been steady at 30 percent of transactions since 2010.
  • Falling energy prices held down consumer price inflation.  Data today showed that headline prices were 0.1 percent lower in October from the month before but are 3.5 percent higher than one year ago.
  • Taking out volatile food and energy prices to examine core prices, we see that they are up 0.1 percent in October and 2.1 percent from one year ago; this inflation may not be fun for consumers at the cash register, but it is unlikely to spur the Fed to tighten policy anytime soon.
  • Digging deeper into the price data, rents are up 2.4 percent in the year and 0.3 percent per month in the last 4 months.  Owner’s equivalent rent, what a home owner could expect to receive as rent if she were to rent out her home, has increased 1.6 percent in the last year and 0.2 percent per month in the last 4 months.
  • These increases are both good news for owners who have a fixed rate mortgage.  Unlike renters, they have a constant mortgage payment each month.  Furthermore, should they need some flexibility in their situation, the rent they can earn if they convert their residence into a rental is also increasing.