By Tyler Durden,
Mortgage applications collapsed 13.1% week-over-week, the worst drop since the heart of the COVID lockdown crisis in March 2020...
As MBA reports, the Refinance Index plunged 16% from the previous week and was 56% lower than the same week one year ago.
But most notably, the seasonally adjusted Purchase Index tumbled 10% from one week earlier - after holding up for a few weeks amid rising rates. The unadjusted Purchase Index decreased 6 percent compared with the previous week and was 6 percent lower than the same week one year ago.
Source: Bloomberg
Joel Kan, MBA’s Associate Vice President of Economic and Industry Forecasting, warned:
“Purchase applications, already constrained by elevated sales prices and tight inventory, have also been impacted by these higher rates and declined for the third straight week. While the average loan size did not increase this week, it remained close to the survey’s record high," adding that "higher mortgage rates have quickly shut off refinances, with activity down in six of the first seven weeks of 2022. Conventional refinances in particular saw a 17 percent decrease last week."
Source: Bloomberg
And finally, what does all this mean for the housing market? Nothing good, we are afraid.
Home price acceleration is set to slow dramatically as rates rise...
Source: Bloomberg
However, more ominously, we are seeing a pattern play out in home sales that does not look good...
Last month saw an unexpected surge in existing home sales (as mortgage rates soared), as buyers were likely anticipating further rate increases and locking-in at the low rates...
Source: Bloomberg
However, as the 2013 taper tantrum showed, this exact pattern does not end well - first the rush to lock in rates, then the collapse in home sales...
Source: Bloomberg
As Lawrence Yun, NAR's chief economist, explained: the forthcoming increase in mortgage rates will be problematic for at least two market segments:
"First, some moderate-income buyers who barely qualified for a mortgage when interest rates were lower will now be unable to afford a mortgage," he said.
"Second, consumers in expensive markets, such as California and the New York City metro area, will feel the sting of nearly an additional $500 to $1000 in monthly payments due to rising rates."
Source : https://www.zerohedge.com/personal-finance/mortgage-applications-collapse-most-march-2020-covid-crisis
