March 6th, 2014 3:27 PM by Nick Rapplean
Can any one explain these numbers?
The week before last, the number of applications for new mortgages-- both purchase money and refinancing-- fell by 8.5%. The week before, applications for purchase money mortgages (the loans with which people complete their purchases of homes) fell by 6% and, the next week, by another 4%.
Though no one claimed to know exactly what was going on, many analysts blamed the bad weather, while many declared that the real estate market was no longer in an expansion, but had started to decline.
Now, that statement is as much as to say, "Hey, Investors, stay away from real estate." The fact is, in the American economy there are ALWAYS analysts who are ready to say "stay away from real estate." I remember when I was much younger and my grandfather was attempting to help me understand economic matters, that he (who was an accountant and banker) had a strong, unbending bias against leveraging real estate. "Not a solid or reliable thing to loan against," he would explain. And I noticed that his argument was really dogmatic. It later reminded me of the scene in Mary Poppins where the old bankers dance their hilarious dance and sing a song about the virtues of tuppence invested prudently in a London bank.
As a rule, bankers didn't like to loan against real estate until the 1930s and 1940s, and even then they were skeptical. They wanted their money in bonds, not in properties.
And what does all of that have to do with loan applications falling by 6% one week and 4% the next? Well, not much, to tell the truth. Except, perhaps, that we're still more ready to believe real estate data can fluctuate wildly than we are to accept the possibility that the moves of the sovereign greenback aren't making much sense these days. The fact is, applications for purchase money loans jumped by an utterly remarkable 9% last week.
Here are a few simple but somewhat iconoclastic ideas I'd like to try out on you. Could it be, perhaps, that we really don't have a shared idea at this point about the direction of the real estate market? Could it be that there isn't an operative majority among investors today; instead, we have a few who are waiting for the real estate market to fall into a black hole (just as there are ALWAYS a few who are waiting for that) while others are expecting the market to take off in a sustainable way, given the need we have for more housing and the demand that has built up.
So the number dive, and one group congratulates itself on being right. Then, as last week, they recover and the optimists rush out and buy a few more shares of builder stocks. And so it goes, back and forth, back and forth.
I promised to work on this puzzle with my friend Watson and report our findings to you. Well, these ARE our findings, I fear.
But they lead to another good point. The BBC has been sending our nation a new version of Sherlock Holmes, starring the wonderful Martin Freeman and (I’m not making up the name) Benedict Cumberbatch. And what I want to suggest is that, since we have no choice but to wait for the economy to make a bit more sense, we may as well wait while enjoying one of the finest and most mind-boggling series ever to make it to our television sets. You'll be glad you watched it, especially if you love great cinematography.