Mortgage Application Numbers Take a Dive

Weekly numbers are hardly ever reliable.  Whether its for sports, economics, or politics, it’s always hard to spot a trend using statistics from just one week.  There’s usually too much “noise,” or random movement of data to spot a genuine trend.  That’s why markets rarely react to weekly unemployment or housing numbers with the same vicissitude that they do with the monthly numbers. 

So, last week, when the number of mortgage applications actually saw an increase, there was little reaction from the market.  Commentators reacted with guarded optimism.  Hopefully, it was said, the numbers represent the market responding to the Fed’s recently strong actions.  It was too early to tell, but perhaps, just maybe, next week’s numbers would show the beginning of some actual good news for a change. 

Well, the new numbers came out today, and that sure didn’t happen.  The weekly numbers saw their largest drop off in well over three years.  Overall, according to the Mortgage Banker’s Association’s (MBA) weekly report, there was a 28% reduction in mortgage applications. 

Furthermore, these figures may very well be overstating the number of applications, as all the bad news surrounding subprime loans and the credit crunch may have led a number of mortgage applicants to file multiple reports. 

The numbers represent a roughly 240 point drop, from 1063.5 to 822.3.  The MBA’s index’s is based on a 100 point system, wherein 100 equals the first week in 1990, when they began their figures.  822.3, for instance, is 8.223 times greater than the first week the MBA began recording its data. 

So, while it is generally difficult to read much of a trend into weekly statistics, such a massive drop-off is certainly a whole lot more than statistical noise.  It is likely the rise in mortgage rates has combined with the negative press coverage of the market in such a way that many who were considering a new mortgage decided against it. 

Rates on thirty year mortgages climbed to 6.09% last week.  Fifteen year mortgages rose from 5.18%  to 5.55%.

The Fed said in testimony in front of Congress yesterday that a continuing decline in housing and related activity can be expected for much of the year.