Economist's Commentary: May 21, 2008

Quick Take on the Economy: May 21, 2008

By Lawrence Yun, NAR Chief Economist

Mortgage applications for home purchases fell 7 percent in the latest week. From a year ago, this component is now down 20 percent.
The general trend in the past seven months has been down with the recent weeks' activity at about 20 percent below the level before the August credit crunch. That is a bit strange given that existing home sales have been soft, yet essentially stable over the past seven months. New home sales have been falling consistently, but they make up only about 15 percent of total sales.
Refinance applications also fell, by 9 percent over the week. The refinance activity is still up 3 percent from a year ago.
This mortgage applications data from the Mortgage Bankers Association appears to have lost a lot of its predictive power regarding home sales. Last year, just as home sales were falling, mortgage applications showed a stable to rising trend. The sampling may not be representative of true industry activity.

NAR's measurement for future commercial building construction and net absorption fell for the third straight quarter. Read more in detail here.

Weakening mortgage activity is not a positive sign. But the relationship between mortgage application and home sales should be taken with a grain of salt in the current environment.
Commercial real estate had been solid in 2006 and 2007. It will not be the case in 2008.

This is one in a series of commentaries by the Research staff of the National Association of REALTORS®. Read more commentaries >

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