December 12, 2007

People are still buying homes

Mike Plaiss e-mails...


Thought you may enjoy these two graphs relating to the second of the �two good stories� you posted.

The first shows the Mortgage Bankers Association "Purchase Index" for the past 18 months. (MBA is the same group referenced in the article.) The second shows the same association's "Refinance Index". The source for all of the data is Bloomberg.

As you can see, people are still buying homes, and at a pace indistinguishable from the recent, pre-mortgage-crisis, past. In my mind the Refi index is just as interesting. The first thing one needs to get a refi done is a bank willing to do the refi. In other words, the bank is getting a second look at the collateral, and the creditworthiness of the borrower. If one is worried about the consumer, then the surge in refi activity is very good news. People pretty much refi for one reason only � to lower their monthly mortgage payment. A successful refinancing truly increases their wealth and helps maintain their buying power.

It should be noted that the index shows applications for a refi, not closed deals. But consumers are not stupid, and would likely not go through the trouble of completing an application unless they had good reason to think they would be successful.

Posted by John Weidner at December 12, 2007 8:13 PM
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