Even while the Mortgage Bankers Association (MBA) adjusts its data for seasonality, it could still be noisy or skewed by Memorial Day variation. However, we suspect several extraordinary issues are at play in messing up mortgage flow, and for that matter general economic activity as well. It’s the weather stupid!
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The MBA reported for the week ending June 3 this last week, which included the May 30 falling of Memorial Day. There was a wild variance between the week’s seasonally adjusted and unadjusted mortgage application indices, so the holiday certainly came to play. However, considering activity dropped relatively sharply even after adjustment, it’s possible the MBA may have done an imperfect job in its tweaking. However, common sense tells us that several extraordinary issues are likely at play here and in other data.
Let’s Look at the Housing Data:
The MBA reported for the week ending June 3, which included the May 30 falling of Memorial Day. Of course, the prior week did not include the holiday, and produced a relatively stronger flow of activity. The MBA’s Market Composite Index of mortgage activity fell by 11% on an unadjusted basis, but only decreased 0.4% after adjustment. The MBA’s Refinance Index, which is not seasonally adjusted but tweaked for the holiday, gained 1.3% against the prior week. It had good reason to rise, as the average contracted rates on 30-year and 15-year fixed rate mortgages improved to 4.54% (from 4.58%) and 3.67% (from 3.78%) in the period.
The Purchase Index, which measures mortgage applications on home purchases, fell 15.2% before adjustment due to the holiday. However, it sank 4.4% even after adjustment. Why the non-negligible decline in Purchase Activity even after adjustment? I think the weather came into play, with so much of the central portion of the country battling floods and tornadoes of late. I know that weather impact is vague and tough to measure, and often used by corporations and the government to cover for failure. However, we’ve seen an extraordinary level of flooding within the nation’s center, and apocalyptic tornadic activity could certainly have frozen business with its inherent uncertainty. Thus, with regard to housing and mortgage activity, and also general economic activity, we should not rule out the impact of weather over these last few months as an important factor in recent softness. Homes have proven not to be weatherproof.
Yeah I said it, it’s the weather stupid! It’s certainly had some negative impact, though we continue to see gasoline prices near $4 and high commodity costs as more important.
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