Survey Question of the Day

So what does it mean when mortgage interest rates are at an all time low but purchase mortgage applications are nonetheless at their lowest in 14 years? I could make this multiple-choice but I don't think that is necessary.

http://www.calculatedriskblog.com/2010/07/mba-mortgage-purchase-applications_14.html

I initially left the post at what is said above but cannot resist adding a couple of other tidbits. First, retail sales are continuing to stuggle.

http://seekingalpha.com/article/214439-forward-economic-outlook-rapidly-deteriorating?source=dashboard_macro-view

This should not be at all surprising, given the following:

- unemployment is not showing any significant improvement (even with the baked numbers the government puts out) and with unemployment benefits ending for millions of Americans there are a lot fewer pockets to be spending;
- home piggy banks are still not there and will likely not be for some time;
- over 25% of folks have terrible credit scores (up from 15% a few years ago), 599 or under, and that prevents them from even getting a credit card or increasing limits, so they have no choice but to curtail spending; and
- people have actually started saving again and paying down debt, which is inconsistent with retail sales increasing.

On the last point, I find this rather promising. It will take many years to get individual debt levels back to normal (and I will not even talk about government debt here), but it looks like normal spending levels - i.e. us living within our means - is getting there pretty quickly. We spent the better part of the past two decades living beyond our means and I view us presently as simply reverting to mean. Accordingly, those economists with rather rosy growth projections do not appeal to me. Even if they are correct, the growth will be built on debt (private or government) and it is not a wise thing to do. We cannot afford to go back there. I truly think individuals in this country, by choice or otherwise, realize our spending ways need to be behind us despite the government doing what it can to spur us on to more spending. So for an economy that is about 70% consumer spending, I suspect we will not see any major increases in GDP for a few years (and I hope we do not).


Disclosures: None.