Unintended Consequences.

MBA Applications (week ended 10/24/2014)

– Purchase Index Week/Week -5.0%. Previous weeks were -5.0%, -1.0%, +2.0%, +0.0%, -0.3%, +5.0%, -3.0%, -2.0%, +3.0%, -0.4%, -1.0%, and -1.0%.

– Refinance Index Week/Week -7.0%. Previous weeks were +23.0%, +11.0%, +5.0%, -0.3%, -7.0%, +10.0%, -11.0%, +1.0%, +3.0%, +3.0%, and -4.0%.

– Composite Index Week/Week -6.6%. Previous weeks were +11.6%, -5.6%, +3.8%, -0.2%, -4.1%, +7.9%, -7.2%, +0.2%, +2.8%, +1.4%, and -2.7%.

The purchase index is a leading indicator of weak sales.  This supports yesterday’s lower Home Price Index.  The Federal government has intervened big-time in the housing market post-Lehman.  While that has created benefits it also supported home prices at a higher level than otherwise.  With job creation still not producing jobs which can qualify for loans for homes at these prices and tightened lending standards per CFPB we have a soft housing market.  As always, the Federal government will blame this on someone else.

I am not saying that there was not value in supporting housing.  I am saying that what we now see is the unintended consequence.