Mortgage purchase applications dropped 5% last week. They were down 15% year over year for the same week in May. This is May. May is supposed to be the second or third strongest seasonal month for home sales. Purchase apps have been down 7 of the last 9 weeks. This is occurring in the strongest part of the year for housing. There’s no bad weather “issues” and, as I’ll show below, inventories are starting to climb quickly.
Purchase mortgage applications are based on contract signings. The Census Bureau measures new home “sales” on contract signings. 93% of all new homes are purchased using mortages. This means new home sales for May will disappoint when they are released next week. Existing home sales are based on closings. Closings take about 30-45 days right now (note: time to close is shorter than a year ago – less volume to process). This means June’s existing home sales report in July will be bad.
Flippers are going to be stuck with homes. They rely on traditional, mortgage-financed buyers in order to flip. I saw a big sign on a corner of a very busy intersection in a prime are of Denver that said, “investment homes for sale.” That’s a flipper looking to flip to other flippers.
I just published an article titled: Are Home Prices About To Tumble on Seeking Alpha. I have detail four unmistakable signs that tell us the housing market is dying. It will soon be dead on arrival…
Economists and Wall Street are missing badly now on their forecasts for everything. Way too optimistic. Today’s current account deficit was the perfect example. They missed by a significant amount. Hack meteorologists like Al Roker are blushing for them. The economy will show even more of a contraction in Q2 than in Q1. Housing is leading the way down.