MBA: Mortgage Purchase Applications Hit 10-Week High

Real Estate Broker/Owner

In the latest sign that the housing market is indifferent to sub 5% mortgage rates, according to the Mortgage Bankers Association, the mortgage purchase application index jumped 7.3% to 280.3, the highest reading in over 10 weeks.  This was despite the fact the average 30-year fixed rate mortgage was 5.44% for the week ending June 19th.

Here is a comparison between NAR's seasonally adjusted existing home sales and Freddie Mac's 30-year fixed rate mortgage survey over the past several months, this data reveals that record low mortgage rates have had no meaningful impact on demand.  You can call it the law of diminishing returns, price inelasticity, beating a dead horse, whatever, this is a concept that I have wrote about on more than one occasion.

Sep 2008:  5.10 million sales / 6.04%

Oct 2008:  4.94 million sales / 6.20%

Nov 2008:  4.54 million sales / 6.09%

Dec 2008:  4.74 million sales / 5.29%

Jan 2009:  4.49 million sales / 5.05%

Feb 2009:  4.71 million sales / 5.13%

Mar 2009:  4.55 million sales / 5.00%

Apr 2009:  4.66 million sales / 4.81%

May 2009: 4.77 million sales / 4.86% 

So what does this mean?  It means that the Fed blew $1.25 trillion in an experiment that was designed to stimulate the housing market and all they have to show for it is a short lived refinance boom.  Unfortunately, the unintended consequences is that as result of printing this money, rates will have to move much higher and that will negatively impact the housing market in 2010 and beyond.  This is yet another reason why we are only in the eye of the storm for this housing depression.


Comments (6)

Charlie Ragonesi - Big Canoe, GA
Homes - Big Canoe, Jasper, North Georgia Pros

This continues to be good news and it amazes me that all the naysayers out there do not recognize it

Jun 24, 2009 01:10 AM
Mark MacKenzie
Phoenix, AZ

Charlie:  I too am amazed that these numbers are not recognized.  It seems as though there is a panic about 5.5% mortgages rates crippling a housing recovery.  The truth is, 4.5% mortgages rates never helped.

Jun 24, 2009 01:26 AM
Heather the Realtor Orlando, Lake Mary
LemonTree Realty - Orlando, FL
First Time Home Buyers, Bank Owned Homes

I agree we hae a good 2 years left of this adn all these people out there think sales are great we are coming out I keep trying to tell people whats coming.

Jun 24, 2009 01:27 AM
Melina Tomson
Tomson Burnham, llc Licensed in the State of Oregon - Salem, OR
Principal Broker/Owner, M.S.

I agree Mark. I saw little movement when interest rates were low. People care about price.  While I appreciated my refinance and nice super low interest rate, it isn't good for the long term health of our economy.

Jun 24, 2009 06:07 AM
Brian & Marie Spray - Action Realty Group - Frisco, TX
Frisco TX Realtors

Mark - are we in the eye of the storm yet?

Jun 24, 2009 09:32 AM
Jim Crawford
Maximum One Executive REALTORS® - Atlanta, GA
Jim Crawford Atlanta Best Listing Agents & REALTOR

Great observation!  I think you confirm what many are thinking.  The problems with all the details..they are never published in the same place.  Thank you for putting this together.

Jun 24, 2009 04:24 PM