MBA Mortgage Applications fell 6.70%
Although mortgage rates fell to 4.08% in September, mortgage applications haven’t reacted the same. They reported a fall of 6.70% for the week ending September 25, 2015. The Purchase Index fell 6% and the Refinance Index fell 8% from the prior week. This suggests a fall in the number of homebuyers.
IYR declines with falling mortgage applications
MBA (Mortgage Bankers’ Association) mortgage application data provide insight into the housing sector and help gauge economic strength. Over the past week, the iShares US Real Estate (IYR) fell 1.60%. Even real estate stocks like Simon Property Group (SPG) and American Tower (AMT) fell 0.40% and 0.20%, respectively, for the same period.
The MBA survey covers over 75% of all the US retail and residential mortgage applications. It has been conducted weekly since 1990. Respondents include mortgage bankers, commercial banks, and thrifts. This is a leading indicator for single-family home sales and housing construction.
A fall of 6.70% indicates poor consumer sentiment. It suggests that the economy is losing strength because the number of Americans applying for mortgages, to buy a home or to refinance an existing mortgage, is falling.
REM continued to fall
Over the past week, the iShares Mortgage Real Estate Capped ETF (REM) fell by 7.70% as of September 30. As of September 30, financial stocks like Bank of America (BAC) and Citigroup (C) fell 0.13% and 0.16%, respectively, over the past week.
Barring new home sales and construction activity, all of the other indicators about housing activity have been on the lower levels. A fall in mortgage applications along with falling housing starts and building permits by 6.50% and 12.50% in August continued to increase the pessimism surrounding the housing market.
The manufacturing activity forms an important segment of economic growth. Tracking the activity helps to gauge the economic prospects early. One of the indicators is the Chicago PMI (purchasing managers’ index). We’ll discuss it next.