Mortgage applications rose to their highest levels in 15 months last week based mainly on refinancing. Sadly for local builders, applications for purchases were down 3.4%. Here is a link to the table/data:
http://www.reuters.com/article/idUSN1715642620100818
Below is a chart from a from a presentation I gave last week (different subject,how builders should take advantage of energy efficient incentives and consumer demands) , which shows that the refinancing phenomena was at its height, during the housing bubble. American consumers/homeowners,70% of us, during that time took almost 5 billion dollars a quarter out of the equity of their homes! Common sense dictates not all were spending on big screen TV's, SUV's etc. I contend a majority were refinancing as their ARM's were about to balloon to keep payments lower, or just taking advantage of the record low interest rates. I would also guess that many, possibly a majority were using equity as living expense. Wages during this time did not keep up with inflation ( that was masked by the massive draw on home equity). Some data may show that household income may have increased but one could argue that was a result of the two household income which became a necessity during the 90's. In fact employment and job creation remained stagnant during that time.
IF this hypothesis is true then the turn around we are all hoping for not only in the housing market but the economy as a whole will likely not be a turn around at all. During the next couple of days I am going to pull together the economic data to either support or disprove that hypotheses.
More to follow....
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