The Mortgage Corner

Total existing-home sales, which are completed transactions that include single-family homes, townhomes, condominiums and co-ops, dropped 5.1 percent to a seasonally adjusted annual rate of 4.62 million in January from 4.87 million in December, and are 5.1 percent below the 4.87 million-unit pace in January 2013.

Last month’s level of activity was the slowest since July 2012, when it stood at 4.59 million, and signals the effect of low inventories and rising interest rates that have cut mortgage applications to their lowest level in a year.

Total housing inventory at the end of January rose 2.2 percent to 1.90 million existing homes available for sale, which represents a 4.9-month supply at the current sales pace, up from 4.6 months in December. Unsold inventory is 7.3 percent above a year ago, when there was a 4.4-month supply.  But both rates are far below the  6-month inventory level in more normal times.

existhome

Graph: Calculated Risk

Meanwhile, mortgage applications are down for the year.  The MBA’s weekly mortgage applications refinance survey is down 70 percent since May, and its purchase index is down 8 percent in a year.

MBAapplics

Graph: Calculated Risk

This is even though 30-year fixed conforming rates are down to 4.0 percent since the latest signs of slowing factory activity and job creation over the past 2 months.

But the slowdown may be temporary, as the NY Fed’s just released Q4 Household Debt and Credit Report said consumers are paying down their debts while spending more.  The report showed that total household debt is 9.1 percent below the Q3 2008 peak. Mortgage debt is down 13.4 percent from the peak, and Home Equity revolving debt is down 25.9 percent.

householddebt

Calculated Risk

Does this mean the household deleveraging of debt that has held down consumer spending since the Great Recession is over?  Are consumers opening up their wallets finally, and will this boost 2014 housing sales? 

We believe so, because of the tremendous pent up demand generated by 5 years of subpar housing construction that has reduced inventories, much lower delinquency rates, and a growing population that is boosting housing demand.

Harlan Green © 2014

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