Home Prices: Broad Trend Likely Down

June 8th, 2011
in econ_news

Econintersect: Mortgage applications decreased 4.0% week-over-week for the week ending May 27, 2011. According to the Mortgage Bankers Association’s (MBA) Weekly Mortgage Applications Survey, on an unadjusted basis, the Index decreased 4.2% compared with the previous week.

Econintersect has consistently warned that mortgage applications are no longer predictive of home sales as over 1/3 of the current home purchases are not financed.  Real time home price data provider, Altos Research, has some forecasts:

Follow up:

  1. If you’re expecting a smooth, consistent 3-5% annual growth rate in housing, you’ll be waiting a while. It just ain’t happening.
  2. No, we didn’t proclaim – “It’s a great time to buy or sell real estate.”  What we said was that periods of volatility and market inflections offer opportunities for traders to profit with the right information.  (See John Paulson circa 2007)
  3. Expect a triple dip, a quadruple dip, and a quintuple dip.  Heck, we saw back in July that 2011 home prices would fall below 2009 levelsWe confirmed this in November. Expect volatility. Repeat: Expect volatility.
  4. History shows that volatility is normal. And we all agree that the mid-90′s through 2007 was just a bit abnormal. (a.k.a “The Constant Growth Myth”):


"History of Home Values" from Robert Shiller's "Irrational Exuberance"


Mike Fratantoni, MBA’s Vice President of Research and Economics offers the following comments related to this week's mortgage application survey:

“Interest rates fell last week as incoming economic data was weaker than anticipated. Despite this drop in rates, the number of refinance applications fell. In fact, the last time mortgage rates were this low, refinance volume was more than twenty percent higher. It is likely that many borrowers still cannot qualify to refinance given the lack of equity in their homes.”

It is becoming clear that the mortgage crisis cannot end until home prices stablize.

The refinance share of mortgage activity decreased to 65.7 percent of total applications from 66.8 percent the previous week. The adjustable-rate mortgage (ARM) share of activity increased to 6.2 percent from 5.8 percent of total applications from the previous week.

The average contract interest rate for 30-year fixed-rate mortgages decreased to 4.58%  from 4.69%, with points increasing to 1.01 from 0.69 (including the origination fee) for 80 percent loan-to-value (LTV) ratio loans. The 30-year rate is the lowest since November 2010. The effective rate also decreased from last week.

source: MBA, Altos Research, Calculated Risk

Make a Comment

Econintersect wants your comments, data and opinion on the articles posted.  As the internet is a "war zone" of trolls, hackers and spammers - Econintersect must balance its defences against ease of commenting.  We have joined with Livefyre to manage our comment streams.

To comment, just click the "Sign In" button at the top-left corner of the comment box below. You can create a commenting account using your favorite social network such as Twitter, Facebook, Google+, LinkedIn or Open ID - or open a Livefyre account using your email address.

 navigate econintersect.com


Analysis Blog
News Blog
Investing Blog
Opinion Blog
Precious Metals Blog
Markets Blog
Video of the Day


Asia / Pacific
Middle East / Africa
USA Government

RSS Feeds / Social Media

Combined Econintersect Feed

Free Newsletter

Marketplace - Books & More

Economic Forecast

Content Contribution



  Top Economics Site

Investing.com Contributor TalkMarkets Contributor Finance Blogs Free PageRank Checker Active Search Results Google+

This Web Page by Steven Hansen ---- Copyright 2010 - 2016 Econintersect LLC - all rights reserved