Home buyers “seize a dip in rates” and rush back into the housing market, LOL?
By Wolf Richter for WOLF STREET.
For example, on CNBC this morning, we read: “Mortgage demand climbs to the highest level in five weeks after interest rates move lower. Or on MarketWatch, we read: “U.S. mortgage demand hits five-week high as buyers seize a dip in rates.”
This was based on the weekly applications for mortgages to purchase a home, released this morning by the Mortgage Bankers Association. Mortgage applications ticked up a tiny little bit, but that uptick can barely be seen in this three-year plunge of mortgage applications to the lowest levels in the data going back to 1995.
And that uptick itself was tiny compared to prior increases in this very volatile data, and mortgage applications to purchase a home were still down by 47% from the same period in 2019, and by 61% from January 2021:
“Declining spending adds to signs the economy is cooling after hot summer,” the WSJ said hilariously as subtitle under the article, “U.S. Retail Sales Fall for First Time Since March as Holiday Season Approaches.”
Total retail sales, after having jumped by an upwardly revised huge 0.9% (11.3% annualized) in September, and by 0.7% (8.7% annualized) in August, edged down 0.1% in October from September, in what is highly volatile data that gets heavily revised as more data is collected.
Retail sales dipped to $704.95 billion in October, from the record in September of $705.7 billion, seasonally adjusted.
Retail sales in October were higher than the unrevised September retail sales. That’s how it goes. The volatility in the data and the revisions are why we use a three-month moving average, which shows the trend.
The three-month moving average shows the actual slowdowns we briefly had last year:
In addition, prices of goods dropped, showing that consumers bought more product.
Retail sales are sales of goods by retailers. And prices of many goods have been dropping as inflation has wandered off into services.
Prices of durable goods (autos, electronics, furniture, appliances, tools, etc.) dropped 0.4% in October from September – I discussed this at length yesterday in Beneath the Skin of CPI Inflation:
Prices of non-durable goods (gasoline, food, supplies, clothing, shoes, etc.) dropped by 0.7% in October from September, driven by a plunge in gasoline prices.
Because prices of goods dropped faster than retail sales of goods, consumers bought more product in October than in September.
This is why the dip of 0.1% in retail sales was smaller than expected; the consensus had pointed at a drop of 0.3% based on the price declines in goods we’ve been seeing which should have lowered the dollar sales. Inflation has long ago moved to services.
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