Weak Housing Market – MBA Mortgage Index Increases Week Over Week

Homebuilder stocks suddenly are cratering. Also, banks are falling on worries that high mortgage rates will stifle demand for loans. Housing reports are the most important economic reports to review.

There were three reports on Wednesday. First, we have the MBA mortgage applications index from the week of October 19th. This is a weekly report which means it is volatile.

The composite index was up 4.9% from last week. The purchase index was up 2% and the refinance index was up 10%. It’s important to contextualize the data.

They were up on weak comparisons as the previous week had a sharp decline. This report doesn’t mean the housing market is recovering.

Year over year increase in purchase applications fell from 1.8% to 0.2%. The comparisons altered those results. Refinancing is 39.8% of mortgage activity.

The average 30-year fixed rate mortgage was up 1 basis point to 5.11%. This is the highest level since February 2011. Mortgage rates are up 93 basis points year over year.

Purchase applications are about to go negative on a year over year basis, just as August. It shows us that this was far from a spectacular report.

Weak Housing Market – FHFA Housing Price Index

The FHFA housing price index is from August. Meaning, it clarifies why investors in homebuilder stocks are panicking. The index was up 0.3% month over month. That fell from last month’s 0.4% increase and met expectations.

It was up 6.1% year over year which is down from the 6.6% increase in July. This reading is the worst growth rate since January 2017.

Best region was the Pacific which was up 0.8% month over month and 7.3% year over year. Mountain region was up 8.4% year over year and unchanged month over month.

Denver and Seattle have been some of the hottest housing markets as speculation and job creation have pushed up prices.

There is a general trend of people moving west. Amazon’s job creation is great for Seattle. There are also restrictions on multi-family home building in cities like Seattle. This prevents supply from meeting demand.