The “New Normal” for Mortgage Purchase Applications (After the Bond Bull is Gone)

Confounded Interest ^ | 07/14/2013 | Anthony B. Sanders

[whitedog57]

The US has experienced a phenomenal run (bull market( in Treasury and mortgage rates from September 1981. (US 10 year Treasury yield in white, The Fed Funds Target rate in red).

t10fedfunds

We can examine mortgage purchases applications (courtesy of the Mortgage Bankers Association) in distinct regimes over the bond bull market. The first regime is 1990-2008 where mortgages rates are generally falling and mortgage purchase applications are rising.

mbpurchmb30pre2008

The second regime is 2008-2013 where house prices collapsed in many parts of the US, despite continually falling mortgage rates. In this regime, mortgage purchase applications fell (on average) with mortgage rate declines.

mbapurchmb302008

The third regime is the recent “May Day Massacre” regime from May 1st 2013 to today where we are seeing mortgage rates rising and mortgage purchase applications falling.

mbapurchmb30mayday

The good news is that rising home prices (again) has thwarted the downward pressure in mortgage purchase applications. But rising rates will likely reverse the momentum. Is this the “new normal” if the bond bull market (and The Fed) is gone?

hphouse071413

Let’s see what happens to Treasury and mortgage rates this week. The MBA’s mortgage application indices are due out on Wednesday.

By the way, I was pleased that my Fox Business interview with Lori Rothman made the front page of Foxnews.com. But it was replaced today with an interview with Hardcore Pawn star talking about gold prices.

[whitedog57]

The big housing recovery is cash, Wall Street and fureign investors. Fed enabled Wall Street wealth, normal citizens stuck on the sidelines.

[Vince Ferrer]

From now into the forseeable future, everything that worked during 1982-2008 for earning money in real estate will not work anymore. Previously houses gained equity as interest rates dropped. Now houses will lose equity as interest rates rise. Historically, houses were seen as an expense, not an investment. They will be an expense again.

[familyop]

Prices might be going up in some areas, but I’m skeptical, too. Check tax assessor’s records before buying. Many of them are the Web. Make sure that the large dream house isn’t recorded as a barn or mobile home (those that didn’t pass inspections, perhaps).