CFAH

Having inched up from a 22-year low last month, Mortgage loan application volume in the U.S. ticked down 1.7 percent on a seasonally adjusted basis last week, including a 4 percent seasonally adjusted drop in purchase mortgage activity which was down 18 percent versus the same time last year.

At the same time, the average purchase loan size, which hit a record $460,000 in March, driven by a change in the percentage of applications for higher-end homes (i.e., mix), which many in the industry and media have been misreporting as straight appreciation, dropped to $415,000 last week, “pulled lower by the potential moderation of home-price growth and weaker purchase activity at the upper end of the market,” trends which shouldn’t catch any plugged-in readers by surprise and should soon translate into a drop in the median home sale price as well.

Comments from Plugged-In Readers

  1. Posted by What a town

    Hold on!! If the current increase in housing supply results in a drop in housing price, does that mean that supply & demand economics are actually real?…… sounds like voodoo to me

    • Posted by two beers

      It helps to read the whole headline: “[…] Average Loan Size as Well”

      If buyers can’t afford to pay what sellers want, and if sellers need to sell, then sellers will have to lower their prices to what buyers can and are willing to pay. If sellers don’t need to sell, they have the option to sit on “their price”, and follow the market down or wait it out for the next cycle.

      The “increase in supply” is due partly to waning demand, so houses stay on the market longer. S&D are variable and interdependent curves, not isolatable entities.

      Markets are much more complex and interesting than the S&D model taught in Econ for Kiddos. Neo-classical econ pedagogy is one of the great crimes of education, and is one of the main reasons for the continuing cycles of economic idiocy we seem compelled to endure (see Michael Hudson, Yves Smith, and Steve Keen for the gory details). Truisms and tautologies, yay.

      • Posted by L&E

        In the housing market, supply and demand curves are variable, but they are not interdependent.

        • Posted by two beers

          So, builders don’t add new supply to meet perceived demand? Existing supply doesn’t skyrocket when demand plummets (slower clearing and panicked dumpers)? Perceptions of glut don’t tamp down demand?

          While some types of “supply” can be measured (and others like shadow inventory are much harder to quantify), “demand” isn’t even a statistically quantifiable measure – it’s a human emotion or behavior. You might as well model “supply & desire” or “supply & eagerness.”

          This isn’t to say that supply & demand models don’t offer important insights into market behavior, only that it’s not helpful to use them as the sole and absolute models of market activity. On second thought, it is helpful…to the real estate industry! 😂

  2. Posted by L&E

    That’s all just a very basic description of the law of supply and demand. The curves are not changing; the level of supply or demand at particular points on the curves are, of course, different (hence, a curve).

    • Posted by two beers

      It’s not remotely a scientific “law.”

  3. Posted by What a town

    A lot a pretty words above. Does not change the fact that yet again supply has increased and demand has evaporated.

    • Posted by Ohlone Californio

      Demand is down but it hasn’t evaporated. Price is not down, but up. The thing is that 2021 was the statistical anomaly. Should this summer, with its multiple headwinds plus its status as 2+ years into the pandemic, and the travel plans that brought about be such a surprise? I’d be careful to talk about this with any sort of finality or conclusiveness. As if a Ukraine cease fire, Chinese covid related supply lines resolving, fuel prices going down, inflation fears subsiding, and people coming back to town from summer travels wouldn’t each one move the needle?

      • Posted by socal

        I noticed you didn’t include “companies paying more and the wealth gap narrowing” in your list of hypotheticals.

        • Posted by Ohlone Californio

          No, nor did I say millennials coming into traditional home buying ages. That’s not really a hypothetical though.

          • Posted by socal

            What are traditional home buying ages? Because the oldest millennials are now in their 40s, and youngest mid 20s.

          • Posted by Ohlone Californio

            Yeah, that’s what it is. The older 1/3 of the millennials are starting to become traditional home buying ages. They’re really debt averse tho, so it won’t be all of them. That said they are a huge demographic.

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