The Mortgage Bankers Association’s (MBA) Weekly Applications Survey provides data on home lending activity in the United States. It is based on a survey of mortgage lenders and servicing companies and is estimated to capture 75 percent of all application volume for single family homes. The MBA provides weekly data on mortgage application volume and sub-indices for refinancing and purchase volume. In addition average interest rates for both government-backed and jumbo mortgages is provided. The MBA data include mortgage applications for the purchase of a single-family home. Co-ops, apartments and other multi-family dwelling units are not included.
According to the MBA, mortgage applications increased 1.3 percent in the first week in October from one week earlier. The Refinance Index was up 3 percent and is at its highest level since the beginning of August 2013. The purchase index was down slightly and is 6 percent lower than the same week one year ago. Refinancing continues to dominate mortgage activity, up slightly from the prior week to 64 percent at the beginning of October.
The MBA reported that the average contract interest rate for smaller 30-year fixed-rate mortgages with conforming loan balances decreased to 4.42 percent, the lowest rate since mid-June, while jumbo 30-year fixed rates were at 4.45 percent, again the lowest rate since mid-June.
The MBA indices provide a good estimate of activity in the housing market, and are among the only data of this activity available under the current government “shutdown.” The housing market is an important part of the economy, and continued growth in home sales will eventually lead to increased construction, and construction related economic activity.
Interestingly, even with the difficulties in Federal financing including the purported government default, long term interest rates continue at historic lows. Since activity is up, the lower mortgage rates are not reflecting weak demand, but are rather a factor of the Federal Reserve’s continued attempt to keep long term interest rates down by purchasing long-bonds. This “Quantitative Easing,” is not sustainable, and at some point interest rates on mortgages will have to spike. While this has not happened yet, those involved in housing dependent industries should be concerned, even though the short-term numbers appear to be positive.