Home Sales Are Falling- Mortgage purchase applications plummeted to near their 14-year low last week

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http://www.theatlantic.com/business/archive/2011/08/home-sales-are-falling-will-consumers-force-a-double-dip/243754/


As the bad news continues to pile on, Americans appear to be taking note by closing their wallets. The latest brutal report indicates that home buying demand is likely falling to even lower levels. Mortgage applications for purchases were the weakest in more than a year, according to the Mortgage Bankers Association. In fact, its index last week was second lowest that we've seen since 1997. This period includes the huge drop that sales experienced after the home buyer credit expired last year. Consumers are clearly nervous.

Mortgage Purchase Applications Plummet

Here's the chart to provide a little perspective (the green line represents the index value as of the week ending August 12th):



Mortgage purchase applications have been slowly declining since early April, but last week they dropped 9.1%. This data doesn't account for all potential home sales -- some all-cash transactions also occur. But cash purchases primarily occur with investors, so mortgage purchase applications should provide a fairly clear picture on how consumer demand for home buying is changing. At last week's level, demand was extremely weak.

The MBA's report is a useful for two reasons. First, it provides a very early indicator for home buying demand. For example, the National Association of Realtor's existing home sales report that comes out on Thursday provides sales that closed in July, which means it really provides buying demand for as far back as May and June. The MBA report shows us how consumer demand for homes looked just last week.

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