Key Highlights
- Mortgage purchase applications up +18% from last year at this time and +6% from one week ago, according to Mortgage Bankers Association (MBA)
- Two consecutive weeks of positive y/y prints for purchase applications
Purchase applications increased a hefty +18% from last year at this same time and +6% from the first week of June. This increase is the second straight weeks of purchase application increases and looks like a V-shaped curve when looking at a purchase application chart compared to the same week last year.
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The week of March 25, 2020 indicated that purchase applications were at -10% compared to last year. The week of April 8, 2020 showed purchase applications falling to -35%. May 6, 2020 indicates that purchase applications rose back up to -10% and on June 3, 2020, purchase applications rose to almost +20%.
The St. Louis Financial Stress Index, calculated from weekly average of seven interest rates, six yield spreads and five other bond and stock indices, gives us a broad financial stress metric for the stock and bond markets. Unsurprisingly, this financial stress metric was an inverted V- shaped simultaneously with the purchase application true V-shaped curve.
Logan Mohtashami, a HousingWire writer with expertise in the world of mortgages, sees the St. Louis Financial Stress Index as one of five reliable indicators that the US economy is on an upswing. On Friday, May 29, this stress index “went negative” for the first time since February 21, just days after the first reported COVID- related death in the US. If and when the stress text index goes and stays below zero for a period of time, Mohtashami believes we can anticipate the economy recovering. So…two positives per the economy…purchase applications were up and the St. Louis Financial Stress Index was down.
A third key indicator in Mohtashami’s book is the number of jobless claims. June 4’s jobs report indicated that 2.5M jobs were added while the number of jobless claims filed slowed for the sixth straight month.
The data concerning job gains woke up the 10-year yield and caused it to jump to 0.94%, a fourth key indicator. Once that 10-yield goes above 1%, ideally to a new range of 1.33-1.6%, the economy may well be on its way.
All in all, according to Mohtashami, good forward movement towards an economic recovery in the shape of a “V.”
Thanks to HousingWire, the US Department of Labor, the St. Louis Financial Stress Index and the Mortgage Bankers Association.
Also read: “Win-Win” Low Rates & High Loan Approvals, Refi Applications Spike +15%, How About The Rise in Mortgage Applications!
