The Mortgage Bankers Association reported on mortgage activity Wednesday for the week ending June 24, 2011. The news was surprising, as activity declined despite improved interest rates. The MBA's Market Composite Index, which reflects mortgage application activity, fell by 2.7% in the period. However, the movement was hard to justify, given that contracted rates on 30-year and 15-year mortgages averaged 4.46% (down from 4.57%) and 3.64% (from 3.7%).
Refinancing activity was also down despite the improvement in rates, with the MBA's Refinance Index dropping 2.6%. Yet the refinance share of overall activity still managed to gain ground to 69.5% from 69.2% of total mortgage activity. This was due to the pitiful fact that Purchase Activity declined as well. The MBA's Purchase Index fell 3.0% against the week before.
The four-week moving averages for the Market Composite Index and the Purchase Index are both a bit disconcerting. The four-week average of the Market Composite Index was up only 0.7% against the prior week, while the Purchase Index average was down 1.5%. Refinancing activity, however, was up 1.5% over the latest four-week span.
It's hard to say what the cause of the decline was last week. Weather can impact week-to-week comparisons, and another wave of tornadoes did blow through the Midwest and into the East last week. We just heard Bloomberg Radio host Pimm Fox relay the comments of a housing executive; he apparently noted that home shopping drops off sharply if a weekend is rainy versus dry. The start to summer also brings with it slower business activity generally, as well as a less active housing market (versus spring). It's also possible that global uncertainty froze Americans last week, given all the trouble with Greece. Domestically, the possibility of the government finding empty coffers on August 2nd, without a debt ceiling hike, could mean trouble for many, if not all of us. Perhaps public sector employees are shaking in their work-boots instead of home shopping.
What do you think?