July 13, 2011 at 12:08 PM EDT
Beware the Unaccounted for Post Holiday Impact on Mortgage and Other Data
economic insight
The Mortgage Bankers Association (MBA) produced its Weekly Applications Survey this morning, which is a measure of mortgage applications. The MBA reported that in the week ending July 8, 2011 mortgage activity declined 5.1% from the immediately preceding period. But be careful, because there’s a fly in the ointment.

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Beware the Unaccounted for Post Holiday Impact on Mortgage and Other Data

The MBA’s Market Composite Index was adjusted to compensate for the July 4th holiday. Its adjusted index fell 5.1%, while the unadjusted measure dropped 24% because of the day off. While the holiday itself is accounted for by economic data counters, the lull in business activity that occurs the day after a long holiday is of course not captured and may be partly to blame for the weekly adjusted decline in mortgage activity.

Interest rates were certainly conducive to activity, as contracted rates on 30-year and 15-year fixed rate mortgages improved to 4.55% (from 4.69%) and 3.68% (from 3.79%) during the week. This should have been supportive to refinancing activity, but the holiday and also saturation of the refi market led the MBA’s Refinance Index to instead decline by 6.2% through the period.

Purchase activity, or mortgage applications tied to the purchase of a home, decreased 2.6% on a seasonally adjusted basis and was down 21.9% when not adjusting for the holiday. Again, I think the general malaise that impacts the days immediately following July 4th, which are not adjusted for, drove the softness.

Now the four-week moving averages of these measures should offer better insight, but those are also impacted by the week’s noise. That said, the four-week moving average for the seasonally adjusted Market Index was off 4.7% in this latest reporting. Refinance Activity led the trend, with a decline of 6.3%, while the four-week average for Purchase Activity eased 1.0%.

The take-away here is that because of the difficulty in adequately adjusting for holidays, we would be best served not to base any avoidance of real estate on this week’s mortgage activity data. Also, any economic data that compares sequential week periods should be likewise discounted. Instead we suggest investors look towards the longer term factors, trends and outlook, and assemble a mosaic basis for investment decision making.

Editor's Note: Article should interest investors in Bank of America (NYSE: BAC), Freddie Mac (OTC: FMCC.OB), Fannie Mae (OTC: FNMA.OB), Goldman Sachs (NYSE: GS), Morgan Stanley (NYSE: MS), Wells Fargo (NYSE: WFC), Toronto Dominion (NYSE: TD), BB&T (NYSE: BBT), CIT (NYSE: CIT), Bank United (NYSE: BKU), First Citizens (OTC: FCNCA.PK), Synovus (NYSE: SNV), United Bankshares (Nasdaq: UBSI), Hampton Roads Bankshares (Nasdaq: HMPR), WesBanco (Nasdaq: WSBC), City Holding (Nasdaq: CHCO), Sandy Spring (Nasdaq: SASR), First Citizens (OTC: FCBN.OB), SCBT Financial (Nasdaq: SCBT), Wilmington Trust (NYSE: WL), WSFS Financial (Nasdaq: WSFS), Southside Bancshares (Nasdaq: SBSI), Stellar One (Nasdaq: STEL), Union First Market (Nasdaq: UBSH), Eagle Bancorp (Nasdaq: EGBN), First Bancorp (Nasdaq: FBNC), Ameris (Nasdaq: ABCB), The Bancorp (Nasdaq: TBBK), First Community (Nasdaq: FCBC), Capital City (Nasdaq: CCBG), Financial Institutions (Nasdaq: FISI), National Bankshares (Nasdaq: NKSH), Citizens & Northern (Nasdaq: CZNC), Charter Financial (Nasdaq: CHFN), Seacoast Banking (Nasdaq: SBCF), TIB Financial (Nasdaq: TIBB), American National (Nasdaq: AMNB), United Community (Nasdaq: UCBI), Middleburg Financial (Nasdaq: MBRG), Heritage Financial (Nasdaq: HBOS), Zions Bancorp (Nasdaq: ZION), East West Bancorp (Nasdaq: EWBC), City National (NYSE: CYN), Bank of Hawaii (NYSE: BOH), SVB Financial (Nasdaq: SIVB), Westamerica (Nasdaq: WABC), Cathay General (Nasdaq: CATY), Umpqua (Nasdaq: UMPQ), Glacier Bancorp (Nasdaq: GBCI), Pacific Capital (Nasdaq: PCBC), PacWest (Nasdaq: PACW), Western Alliance (NYSE: WAL), First National Alaska (OTC: FBAK.OB), First Interstate Bancsystem (Nasdaq: FIBK), Nara (Nasdaq: NARA), West Coast (Nasdaq: WCBO), TriCo (Nasdaq: TCBK), Territorial (Nasdaq: TBNK), Washington Banking (Nasdaq: WCBO), Bank of Marin (Nasdaq: BMRC), Hanmi (Nasdaq: HAFC), PNC Bank (NYSE: PNC), J.P. Morgan Chase (NYSE: JPM), United Bankshares (Nasdaq: UBSI), Bank of New York Mellon (NYSE: BK), MB Financial (Nasdaq: MBFI), Astoria Financial (NYSE: AF), New York Community (NYSE: NYB), Hudson City (Nasdaq: HCBK), People’s United (Nasdaq: PBCT), First Niagra (Nasdaq: FNFG), Capitol Federal (Nasdaq: CFFN), Washington Federal (Nasdaq: WFSL), Investor’s Bancorp (Nasdaq: ISBC), Northwest Bankshares (Nasdaq: NWBI), Sterling Financial (Nasdaq: STSA), Ocwen (NYSE: OCN), Flagstar (NYSE: FBC), Provident (NYSE: PFS), Colombia Banking (Nasdaq: COLB), Kearny (Nasdaq: KRNY), Brookline (Nasdaq: BRKL), Dime Community (Nasdaq: DCOM), Flushing Financial (Nasdaq: FFIC), Danvers (Nasdaq: DNBK).

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