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 purchase applications and durable goods.

  • There was a slight gain in the number of people applying for mortgages for a home purchase in the past week.  Though the 3 percent weekly gain is a positive sign, this data has been essentially been moving flat line for quite some time and not picking up the upward trend in home sales of recent months.  Something is clearly amiss with this data, as mortgage purchase applications show a decline in the first quarter of this year versus the first quarter of last year, when home sales have been rising at near double-digit percentage gains.
  • The discrepancy between mortgage applications and home sales could be due to several things.  Mortgage data does not say anything about approval rates.  Assuming a reasonably similar approval rate now as in the past, then the rise in applications would imply more home buying through mortgages.  If the approval rates are improving than the actual home sales could be even stronger than suggested by just mortgage applications data.    Also be mindful that about one-third of all home purchases are completed all-cash, completely bypassing the mortgage process, and there has been a slight upward trend towards cash in the past year.
  • Mortgage applications for refinance fell 5 percent in the past week for the sixth straight week.  Mortgage brokers and lenders should prepare for a temporary pickup in refinance in upcoming months from the expanded HARP government refinance program that permits responsible underwater homeowners to tap low rates.  But by the year’s end and next year, the refinance business is expected to be essentially dead because of higher mortgage rate conditions.
  • Separately, durable goods orders rose at a healthy pace.  The economy is expanding.  More jobs are surely on tap in later months.  The orders for construction equipment have been surging of late.  It is unclear as to why.  Both commercial and residential construction of new buildings and homes has only experienced a slow recovery.  The only possible reason for the strong rise in construction equipment orders is due to expanding economies in emerging countries like Russia, Brazil, India, China, etc.

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