Mortgage dropoff = summer meltdown?

Thanks to the excellent BusinessWeek housing blog for this one

Summer Meltdown
Toddi Gutner

The problem with economic statistics are that they tend to tell the story after the reader already knows it. But Ian Shepherdson of High Frequency Economics in Valhalla, NY, tries to make sense of the numbers as they come out in his Daily Notes on the United States--and not months later. He took a look at the downward trend of mortgage applications for residential home purchases that the Mortgage Bankers Association tracks and took the statistics one step further.

A few days ago he stated: If mortgage applications were to remain at this level, we would expect total home sales to settle at annualized rate of about 7-3/4M per month, down about 10% from their trend in the second half of last year and only marginally lower than December. This would count as a slowdown by anyone’s yardstick—the last 10% drop in home sales over a full-year was way back in 1982—but it would not be the meltdown we still expect. In our scenario, mortgage applications do not level off close to their current level. Instead, we expect them to continue falling, at an accelerating pace. By summer, we expect the MBA’s index to be in meltdown territory, in the low 300s.

Sounds a bit grim. Perhaps someone will circle back to this entry in midsummer to see if Shepherdson's predictions were right.