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Housing Market Update- Part One- Professional Edition

Due to the enormity of collecting and reporting all the data at one time, I’m trying something different this month. I will be posting the real estate update in sections as each is complete. We’ll start today with an update of the mortgage applications. That will be followed by a report in the demand side- purchase contracts and sales. Next will come a report on the supply side- vacant and existing units, and then a report on price trends. By breaking the report into smaller pieces I hope to be able to provide you with the updates on a timelier basis. The main drawback is that without having had a complete overview until I’ve reviewed all the data, I won’t be able to provide a big picture summary at the beginning of the reports until the last in the series is complete.

The Mortgage Applications index dropped to its lowest point in 8 years at the end of October. The bailout of Fannie and Freddie last summer had the opposite effect of what was hoped for, as spreads on Fannie and Freddie paper widened dramatically versus Treasuries, pushing mortgage rates higher. I have warned in the Fed Report for several years that when the foreign central banks ended their subsidies for GSE paper, it would have a catastrophic impact on the US housing market. Looking at the second chart below, which shows the purchase applications and refi applications separately, it’s clear that collapse of this market is accelerating. This has finally forced the GSEs and other major mortgage lenders to take the dramatic step of mass mortgage modification taken today.

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Lee Adler

I’ve been publishing The Wall Street Examiner and its predecessor since October 2000. I also publish LiquidityTrader.com, and was lead analyst for Sure Money Investor, of blessed memory. I developed David Stockman's Contra Corner for Mr. Stockman. I’ve had a wide variety of finance related jobs since 1972, including a stint on Wall Street in both sales, analytical, and trading capacities. Prior to starting the Wall Street Examiner I was a commercial real estate appraiser in Florida for 15 years. I was considered an expert in the analysis of failed properties that ended up in the hands of bank REO divisions, the FDIC, and the RTC. Remember those guys? I also worked in the residential mortgage and real estate businesses in parts of the 1970s and 80s. I have been charting stocks and markets and doing analytical work since I was a teenager. I'm not some Ivory Tower academic, Wall Street guy. My perspective comes from having my boots on the ground and in the trenches, as a real estate broker, mortgage broker, trader, account rep, and analyst. I've watched most of the games these Wall Street wiseguys play from right up close. I know the drill from my 55 years of paying attention. And I'm happy to share that experience with you, right here. 

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