Consumers give Lenders the cold shoulder?

This week two news items from the mortgage industry caught my attention.  First, interest rates rose very slightly, by about .2%.  Even with this latest rise, mortgage rates are still under 5%. Second, the number of mortgage loan applications dropped by 2.5% (seasonally adjusted) and refinances, which account for 76% of all mortgage loan applications dropped by .7% from the previous week. 

With all the selling in the Treasury market the last few weeks and the subsequent rise in the Treasury rate, we were bound to finally see interest rates rise no matter how nominally.  The fact that they have not risen in the last six months still surprises me.  Until now, I never would have believed that rates could stay so low for so long.  Of course, I'm old enough to have had an interest rate of 10.5% on my first home and that was considered a good rate at the time.  Rates below 5% are both historic and an astounding opportunity. 

But it's the decline in mortgage applications that really caught my attention.  The articles I have read have taken the numbers as a bad sign.  They talk about unemployment and how it relates the recovery of the housing market.  I've seen other articles use the information to address the lack of new home starts in new build communities.  I've seen some very interesting articles talk about how this is an indicator for so many things, but I think they have missed something simple.  It's cold outside. It's really cold outside, almost everywhere.

Whenever we get these unseasonable cold snaps, fewer people want to go out and play. Who wants to brave the wind, ice, and cold to look at houses, when you could be snuggled under a blanket? It's not just cold (15 degrees at my office today when it should be 40), but the holidays also are right around the corner.  I think it's just human nature to bundle up, stay inside, and push that new home search back until the first of the year.  I've never kept records, but when the temperature drops or God blesses us with an abundance of snow, my phone rings a little bit less.  So what does this one-week drop in loan applications say about the real estate market and the larger economy?  In the end, I think very little. Once we return to more normal temperatures, I suspect that activity will pick up again.