This year is already one-third in the books, and everyone is waiting for that fabled “pent-up housing demand” to announce its presence, just like every sunny-side up analyst is waiting for that fabled “money on the sidelines.”
But if it’s coming, it’s taking its sweet time and it’s definitely not dropping any hints on when it plans to arrive.
The truth can actually be summed up by an exchange from my favorite cult movie.
The Operative: “It’s worse than you think.”
Mal Reynolds: “It usually is.”
The Mortgage Bankers Association notes that mortgage applications are down 16% from this time last year, and mortgage activity is actually at its lowest level since 1997. Mortgage originations in general are at a 14-year low according to Black Knight Financial Services.
Housing starts in March rose less than expected and much less than you would have thought given the supposed demand pent up from the bad weather in January and February. (As CoreLogic’s (CLGX) shows - It. Was. Not. The. Weather.)
Housing permits, meanwhile, fell 2.4% and pending home sales for February, the most recent month available, were at their lowest since late 2011.
Bank of America (BAC) reported that its first mortgage originations fell 65% year-on-year in its earnings report Wednesday morning. Wells Fargo (WFC) and JPMorgan Chase (JPM) both have seen their mortgage business plummet.
Maybe the worst harbinger comes from a Credit Suisse report that says buyer foot traffic in 40 major markets was down almost 33% in March 2014 from the level seen in March 2013.
The National Association of Home Builders March confidence index came in at 47, below expectations and below the breakeven 50 mark.
Investor purchases are way down, as well, with companies like Blackstone Group cutting their activity to the bone.
Anthony Sanders, distinguished professor of real estate finance at George Mason University, notes on his blog that with real median household income at 1995 levels, the problem is there are just fewer borrowers who meet lending standards.
“If we look at Seasonally Adjusted Purchase Applications, we see that purchase applications and real median household income are back to 1995 levels, but with lower employment-to-population ratio and M2 Money Velocity. In other words, fewer qualified borrowers,” he writes.
Chart: Bloomberg/Confounded Interest
Unless there is some major sea change, all the signs point to Lynn Effinger being right in his guest editorial for HousingWire.
It's worse than you think.