Mortgage Applications Increase in Latest Weekly Survey Despite Relatively Tight Credit

According to the Mortgage Bankers Association, mortgage applications increased 0.6 percent from one week earlier, according to data from the Mortgage Bankers Association’s (MBA) Weekly Mortgage Applications Survey for the week ending June 16, 2017.

The Refinance Index increased 2 percent from the previous week to its highest level since November 2016. The seasonally adjusted Purchase Index decreased 1 percent from one week earlier. The unadjusted Purchase Index decreased 2 percent compared with the previous week and was 9 percent higher than the same week one year ago.

The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($424,100 or less) decreased to 4.13 percent from 4.14 percent, with points increasing to 0.35 from 0.34 (including the origination fee) for 80 percent loan-to-value ratio (LTV) loans.

Unadjusted mortgage purchase applications continued their upward trend since 2014.

Mortgage purchase applications continue to be relatively lower (by bubble standards) thanks to the curtailment of low credit score lending.

With mortgage rates generally trending upwards, we shall see how this plays out.

US Housing Starts Fall 5.54% MoM In May, 5+ Unit (Multifamily) Starts Plunge 10% (Permits Out West Fell 13%!)

While the US stock market has been on an unprecedented bull market run (thanks in part to The Federal Reserve), the US housing market has only been on a bull run since February 2012.

But housing starts (particularly the single-family detached market) have been slow to come back after the disastrous overbuilding during the housing bubble years. In fact, 1 unit housing starts are back to 1990-1991 recession levels. Despite staggering Federal Reserve stimulus.

The May housing starts numbers were released and they continue to show slow going for housing starts.  Housing starts declined 5.54% MoM from April to June, not what was expected by housing cheerleaders. 1-unit starts fell 3.87% MoM.

5+ unit (multifamily) starts fell almost 10% from April to March. Particularly since the huge surge in June 2015.

Fed rate hikes have consequences.

Building permits way out west fell a whopping 13%!

Here is a video of Fed Vice Chair Stanley Fischer closely monitoring the housing market and the Fed’s impact on it.


Homebuilder Index Falls But Still Near Housing Bubble Peak (While Mortgage Purchase Apps Only At 1997 Levels)

The National Association of Homebuilders (NAHB) released their monthly Market Index reflecting the sentiment of their members. Above 50 means that more members than not are optimistic.

Note that homebuilder optimism has been above 50 (for the most part) since June 2013. Homebuilders can thank The Fed for insanely low borrowing costs that greatly improved their mood.  Builders can build single family detached houses and/or 5+ unit multifamily, so super low interest rates improve every builders’ mood. So the decline in the number of subprime borrowers getting mortgage originations is good news for multifamily builders but not so good for detached housing.

But for existing homeowners, candidates for refinancing are far fewer than they were even in 2016, according to Black Knight.

This helps explain the declining residential loan origination trend for both purchase and refis.

Inventories of existing homes are scarce and getting scarcer by the month. This helps drive up home prices, not good for folks currently renting and wanting to buy.


Tight inventory, interest rate increases, declining mortgage refis.  Well, at least mortgage purchase applications are back to 1997 levels.

Yellen: I honestly thought that mortgage applications and refis would be higher given the trillions of dollars of stimulus we threw at it.

The Thrill Is Gone In Treasuries (10Y-2Y Curve Slope Now Lower Than Before Presidential Election)

BB King sang it best: “The Thrill Is Gone”

At least in the US Treasury market and the 10year-2year yield curve slope.

And the US Treasury 10 year yield is now back to November 10th levels (two days after the election).

30 year mortgage rates have also fallen to levels from just after the election.

Yup, The (Trump) Thrill Is Gone!


Million Dollar Dump! Encinatas Calif “Modest” 1-BDR, 1-Bath Home Valued at $1 Million (No Housing Bubble?)

Encinatas California is located on the Pacific Ocean wedged between San Diego to the south and Marine Corps base Camp Pendleton to  the north.  And this is where a “modest” home is valued at around $1 million.

According to Zillow, “This 520 square foot single family home has 1 bedrooms and 1.0 bathrooms. It is located at 237 La Mesa Ave Encinitas, California.” Its Zestimate®? $973,152!!

This charming abode last sold in 2012 (as The Fed ramped up its last major round of Treasury and Agency MBS purchases (known as QE3) for $260,000.

Rediin has a slightly better photo of the microscopic home which they value at “only” $828,586. Interesting fence and opening design (as if it was an afterthough).

And it does have a large backyard, although rather “primitive.”

The house is not for sale at the moment. I would be interested in seeing how many offers they would actually get.

Likely, this home’s “value” is driven by investors seeking to tear down the existing house and constructing a “mansion near the sea.”  Or else this is actually for occupation by someone who wants to squeeze into a 1 bedroom/1 bath house.

Bear in mind that The Fed’s ambitious zero interest rate policies and quantitative easing has driven down lending rates for shorter-term lending like construction loans, creating a virtual bubble in home replacements in hot markets like the California shoreline. Or are some bailing on the over-inflated stock market and bidding up the price of California coastal dumps?

With San Francisco home prices turning down for tthe first time since 2011, will San Diego follow?

I wonder what actress Bette Davis would have said about this house in Encinatas?

Commercial/Multifamily Borrowing Up 9 Percent from Last Year (Retail Originations Down 23%)

The retail sector can’t seem to buy a break these days. With 8,600 brick-and-mortar stores may close their doors in 2017, lending was expected to decline.

According to the Mortgage Bankers Association, commercial/multifamily originations rose 9% from Q1 2016.

That is the good news.

The bad news? 1) Retail originations fell 23% from Q1 2016.  2) CMBS/Conduit originations were down 17%. 3) Hotel originations were down 40%.

The good news? 1) Healthcare originations were up 22%. 2) Industrial originations were up 40%. 3) Multifamily originations were up 14%.

Notice that Fannie Mae/Freddie Mac multifamily origination programs were up 33% from Q1 2016.  At the same time, Life Insurance Companies saw 0% growth in commercial/multifamily originations.

Thanks to The Federal Reserve, short-term interest rates remain suppresed and have for the last ten years.

Office originations grew at a listless 2% from Q1 2016. On-line retailers like Amazon have helped shrinked the retail footprint. But will shared office space and the internet finally drive a spike through office space when employees can work remotely?

So, will this be the final countdown for office space?