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 home price.
- Aside from the pending home sales index, which declined modestly in December, following a good showing in the previous month, two separate housing data were out today.
- The number of people submitting mortgage applications for a home purchase fell 5 percent in the latest week. Despite the week-to-week bounces, this data has been trending mostly sideways in the past 18 months.
- One should not fully gauge home sales from mortgage activity. Because of excessively tight underwriting standards, about one-third of all home sales recently have been all-cash deals, bypassing the mortgage application process all together.
- One should further keep in mind that this mortgage purchase applications data by the Mortgage Bankers Association is very useful gauge week-to-week directional trends, but tends to have substantial drifts over a long period of time. From 1990 to 2005, purchase applications quadrupled, when home sales only doubled. From 2005 to today, applications fell by nearly 65 percent while home sales fell by 40 percent.
- Separately, the government announced that home prices rose 1 percent in November from October. The data is only based on homes transacted with Fannie and Freddie backed loans. This data is missing home value trends like all-cash transactions and FHA and VA loans. Jumbo-mortgaged homes are also not considered. Still, the 1 percent monthly gain (or 12 percent on an annualized basis) is the strongest since 2005.