Ah, the problems of trying to model residential mortgage purchase and refinancing applications. When mortgage rates fall, models predict a rise in both purchase and refinancing applications. This has left mortgage modelers dazed and confused.

But the recent Mortgage Bankers Association report, revealed that mortgage applications DROPPED 4.78% WoW despite mortgage rates dropping as well.

Mortgage rates have been dropping since November, yet mortgage purchase applications dropped in for the latest week. Very likely this was the displacement of purchase applications was simply the “start of the year” effect after a sleepy holiday season.

Ditto for mortgage refinancing applications. Despite mortgage rates declining. there was “start of the year” surge. But continued rate decreases have resulted in generally declining purchase applications after the surge.

On a long term view, purchase applications have remained sedate following the financial crisis and new regulations.

Mortgage refinancing applications remain in Death Valley.

Perhaps there is a communications breakdown?

Source: Confounded Interest