Mortgage Applications Near Flat as Purchase Demand Falls

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Mortgage Applications in U.S. Slumped Last Week to Five-Year Low
Patrick T. Fallon/Bloomberg via Getty Images
Applications for U.S. home loans rose slightly in the latest week as increased refinancing activity offset a decline in demand for purchase loans as the U.S. government shutdown weighed, data from an industry group showed Wednesday.

The Mortgage Bankers Association said its seasonally adjusted index of mortgage application activity, which includes both refinancing and home purchase demand, rose 0.3 percent in the week ended Oct. 11. That follows a gain of 1.3 percent in the week ended Oct. 4.

The figures come as the U.S. federal government shutdown has cast a spotlight on fiscal policy, with some economists worrying that the stalemate in Congress could drag on the economy.

That shutdown affected the mortgage market, MBA said.

%VIRTUAL-article-sponsoredlinks%"Purchase applications for government programs dropped by more than 7 percent over the week to their lowest level since December 2007, and the government share of purchase applications dropped to its lowest level in almost three years," Mike Fratantoni, MBA's vice president of research and economics, said in a statement.

MBA data showed 30-year mortgage rates edged up 4 basis points to 4.46 percent, but rates were still down from September when they matched the 4.8 percent high for 2013.

The refinancing index gained 3.3 percent after recently hitting the lowest level since June 2009. In contrast, the gauge of loan requests for home purchases, a leading indicator of home sales, fell 4.8 percent.

The mortgage survey covers more than 75 percent of U.S. retail residential mortgage applications, according to MBA.

Mortgage Applications Near Flat as Purchase Demand Falls
The gross domestic product measures the level of economic activity within a country. To figure the number, the Bureau of Economic Analysis combines the total consumption of goods and services by private individuals and businesses; the total investment in capital for producing goods and services; the total amount spent and consumed by federal, state, and local government entities; and total net exports. It's important, because it serves as the primary gauge of whether the economy is growing or not. Most economists define a recession as two or more consecutive quarters of shrinking GDP.
The CPI measures current price levels for the goods and services that Americans buy. The Bureau of Labor Statistics collects price data on a basket of different items, ranging from necessities like food, clothing and housing to more discretionary expenses like eating out and entertainment. The resulting figure is then compared to those of previous months to determine the inflation rate, which is used in a variety of ways, including cost-of-living increases for Social Security and other government benefits.
The unemployment rate measures the percentage of workers within the total labor force who don't have a job, but who have looked for work in the past four weeks, and who are available to work. Those temporarily laid off from their jobs are also included as unemployed. Yet as critical as the figure is as a measure of how many people are out of work and therefore suffering financial hardship from a lack of a paycheck, one key item to note about the unemployment rate is that the number does not reflect workers who have stopped looking for work entirely. It's therefore important to look beyond the headline numbers to see whether the overall workforce is growing or shrinking.
The trade deficit measures the difference between the value of a nation's imported and exported goods. When exports exceed imports, a country runs a trade surplus. But in the U.S., imports have exceeded exports consistently for decades. The figure is important as a measure of U.S. competitiveness in the global market, as well as the nation's dependence on foreign countries.
Each month, the Bureau of Economic Analysis measures changes in the total amount of income that the U.S. population earns, as well as the total amount they spend on goods and services. But there's a reason we've combined them on one slide: In addition to being useful statistics separately for gauging Americans' earning power and spending activity, looking at those numbers in combination gives you a sense of how much people are saving for their future.
Consumers play a vital role in powering the overall economy, and so measures of how confident they are about the economy's prospects are important in predicting its future health. The Conference Board does a survey asking consumers to give their assessment of both current and future economic conditions, with questions about business and employment conditions as well as expected future family income.
The health of the housing market is closely tied to the overall direction of the broader economy. The S&P/Case-Shiller Home Price Index, named for economists Karl Case and Robert Shiller, provides a way to measure home prices, allowing comparisons not just across time but also among different markets in cities and regions of the nation. The number is important not just to home builders and home buyers, but to the millions of people with jobs related to housing and construction.
Most economic data provides a backward-looking view of what has already happened to the economy. But the Conference Board's Leading Economic Index attempts to gauge the future. To do so, the index looks at data on employment, manufacturing, home construction, consumer sentiment, and the stock and bond markets to put together a complete picture of expected economic conditions ahead.
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