US Mortgage Rates Drop Below 7% in Biggest Decline Since July (But MBA Purchase Applications Drop -9.52% WoW, Refi Apps Drop -11.44%)

US mortgage rates fell last week by the most since the end of July, slipping below 7% and helping generate a bounce in purchase applications that otherwise remain depressed, but only in the Seasonally Adjusted data. The NON-Seasonally Adjusted data show a hefty decline.

The contract rate on a 30-year fixed mortgage decreased 24 basis points to 6.9% in the week ended Nov. 11, according to Mortgage Bankers Association data released Wednesday. The group’s index of applications to buy a home rose 4.4% — the most since June — but is still near the weakest level since 2015. 

But the bounce was in Seasonally Adjusted data only. The NON-seasonally adjusted data remained depressed.

Mortgage applications decreased -10.0 percent SA from one week earlier, according to data from the Mortgage Bankers Association’s (MBA) Weekly Mortgage Applications Survey for the week ending November 11, 2022. This week’s results include an adjustment for the observance of Veterans Day.

The Refinance Index decreased -11.44% percent from the previous week and was 88 percent lower than the same week one year ago. The unadjusted Purchase Index decreased -10 percent compared with the previous week and was 46 percent lower than the same week one year ago.

Mortgage purchase applications will continue to fall in NSA terms since it is the Winter and home buying season won’t really start until January. Refinancing applications actually dropped -11.44% even with the drop in mortgage rates.

The data. As my former students know, I like the “raw” data, better known as NON-seasonally adjusted (NSA) data and avoid seasonally-adjusted data (SA) since it hides what is going on.

And on The Fed Futures Front, The Federal Reserve is still looking a hiking their target rate from 4% to just under 5%.

Punch Drunk? US 30yr Mortgage Rate Rises To 6.11%, Highest Since November 2008 (Fed Giveths And Fed Taketh Away … The Monetary Punch Bowl)

The mortgage and housing markets are punch drunk after excessive monetary stimulus since last 2008 and the advent of Fed QE.

As The Fed takes away the massive monetary punch bowl, mortgage rates have risen to the highest since November 2008. And with the withdrawal of monetary stimulus (raising Fed Target Rate), mortgage purchase applications have declined.

Here is a photo of The Federal Reserve fighting the housing and mortgage market.

The Fed’s Gilded Age: A Tale of Today’s Housing Market (REAL Home Prices Rising At 14.6% YoY As REAL Hourly Earnings Fall (-0.41% YoY)

Welcome to The Fed’s Gilded Age … for housing! The gilded age refers to the thin-veneer of gold covering up problems in the late 1800s.

Today’s gilded age is largely fueled by The Federal Reserve’s uber-easy monetary policies combined with absurd Federal government policies. The result? Thanks to inflation, REAL home prices are growing at 14.6% YoY while REAL hourly earnings are declining (-0.41% YoY).

Redfin predicts a more balanced housing market in 2022. Part of their rationale is that they predict mortgage rates will rise to 3.6%. This growth in the mortgage rate is predicted to slow home price growth to 3.2% from double digit growth currently.

While this scenario is plausible, it will require a change in direction of the 10-year Treasury yield which has been declining since 1981. 5.39% YoY inflation may encourage The Fed to raise rates.

Today’s REAL 30-year mortgage rate is -3.08% while the REAL 10-year Treasury yield is -4.67%. It will require a reduction in inflation AND an increase in the nominal rate to get to 3.6%.

With the Freddie Mac 30-year survey rate at 3.10, will a 50 basis point increase in mortgage rates send the market crashing? Not likely.

After all, the US economy is under the thumb of The Federal Reserve.