Despite some misleading headlines making the rounds last week, an uptick in mortgage loan application volume was actually being driven by a jump in refinancing activity, not purchasing, as we outlined at the time.
And in fact, purchase mortgage application volume in the U.S. has since dropped another 4 percent and remains 18 percent lower than at the same time last year, despite a drop in mortgage rates to a six-month low, the market’s response to which has been “rather tepid,” per the euphemistic words of the Mortgage Bankers Association.
I certainly don’t agree with this, but as I was walking by a TV earlier today, I overheard Fundstrat’s Tom Lee on CNBC say that mortgage rates (nationally) “…could drop to something like a 4.75 to 5.2 level next year,” based on a normal spread with the current 10 year Treasury. if that happens (a big if), then expect purchase mortgage application volume to pick up big time.
That drop will be short-lived, not a new trend. Additionally, interest rates will be going down because of a deep recession, not economic improvement. By 2030 you’ll have mortgage well into the double digits, home prices have peaked, most likely for the rest of your life.