Mr. Blues? MBA Mortgage Purchase Applications Rise +3.21% WoW

With all the bad news out there thanks to the Covid-19 such as crude crashing to around $10 per barrel, it is always good to get some good economic news. No more Mr. Blues … for at least the mortgage market for last week.

MBA mortgage purchase applications rising 3.21% WoW.

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The US is still on lockdown, but at least MBA mortgage purchase application rose last week 3.21% WoW.

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The MBA applications index is a survey, so 7+7 doesn’t necessarily equal 14. 

Let’s see what the little Fed book has to say about interest rates this week.

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Is Redwood Deadwood? Jumbo Mortgage REIT Redwood Got Clear-cut

Times are tough for non-GSE firms like Redwood, one of the leading jumbo mortgage companies. Redwood Trust, a REIT, has fallen from around $18 per share in March to just $3.08 today.

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Of course, plunging EPS is the primary culprit (loan payment delays, forbearance) are on the rise with growth in US job loss.

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A YoY earnings growth rate of -33.3% is devastating.

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Redwood is joined by other niche financial companies in hovering around less than $10 per share.

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Lumberjacks ready for some more clear-cutting?

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Mortgage REITs Collapse By More Than 50% Before Slight Rally

Mortgage Real Estate Investment Trusts (MREITs) got clobbered starting February 20th and declined by over 50% before a small rally after the Fed/Congressional bailouts.

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Year-to-date, mortgage REITs are down over 50%.

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The Fidelity and Vanguard bond indices didn’t plunge as far and had a better rebound effect after the bailouts.

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Equity REITs had a plunge and rebound similar to the Dow.

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Mr. Freeze is still around for mortgage REITs.

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Big Bubbles? Fastest Bear Stock Market (Down 20% From Peak) May Happen! Dow Closes Down 1,467

The WHO (World Health Organization, not the 60s/70s rock band) announced that the coronavirus is a new PANDEMIC.

Or it is a bubble pop? Not tiny bubbles as Don Ho sang.  But a BIG bubble … burst.

Yes, The Federal Reserve and other Central Banks kept their target rate near zero for almost the entire Obama Presidency, then started to raise rates only to lower them again. But the S&P 500 and NAREIT – all equity indices have risen dramatically as well.

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A bear market in equities is when prices fall 20% from their peak. Over the past month, we are almost in a bear market.

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Is this that fast 20% in history? Nearly.

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And there is lots of downward rotation in global equities.

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Yes, equity markets are fragile thank to the central banks. And now the bears have been awakened.

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What Virus? MBA Mortgage Applications SOAR With Rate Declines (Particularly Refi Apps Up 55.43% WoW)

If you are watching panic at the Bank of Japan, European Central Bank, and Bank of England, you would think that the Spanish Flu from 1918 that killed between 17 and 100 million people was back.

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While we watch the DJIA shed another 800 points in the first 30 minutes of trading, mortgage applications for last week skyrocketed as is there was no coronavirus.

Mortgage applications rose 55.43% from the preceding week. Refinancing applications rose 78.585 (NSA) while mortgage purchase applications rose 7.21%, far less than refinancing applications.

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Here is a chart of refinancing applications as mortgage rates tumble.

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Let’s see what happens with existing home sales in the next report.