The average number of mortgage applications slid 2.1% on a seasonally adjusted basis as interest rates grew from the prior week, the Mortgage Bankers Association said Wednesday.
The average rate on 30-year fixed-rate mortgages with conforming loans grew to 4.52% from 4.47% the previous week.
On an unadjusted basis, the MBA said the market composite slipped 1% from a week earlier. The refinance index dropped 3%, while the seasonally adjusted purchase index fell 1%.
My opinion: The transmission of the Fed’s taper into the economy is slowly rearing. As the Fed relieves its downward pressure on long-term interest rates, we should expect housing purchases to decline as well. Although the article reports an “unadjusted” percentage, housing purchases usually increase at a near vertical pace at the beginning of the year as seen by the unadjusted existing home purchases graph below.
However, if we remove the seasonality, we get the following:
These graphs extend to 02/14, the latter clearly showing that housing purchases are on an decline. I am pleased to see that decreases appear to be gradual and methodical, absent of drastic spikes. But like I have said in a couple previous posts, I believe now is the time to let the market adjust without another taper announcement so these housing shocks don’t bleed too heavily into other parts of the economy.
Temper the taper!