Making A Mountain Out Of Belly Button Lint

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Making A Mountain Out Of Belly Button Lint.

Why do consumers get confused about whether there is, or isn't, a housing bubble? It's because some copy editors are not as careful with their word choice as they should be when writing headlines.

Look at this story by Reuters headlined "Home loan demand rises despite higher rates."

Is the headline accurate? Yes. Loan demand did rise ... from week to week. But year-to-year comparisons still show loan volume below the levels reached in 2005.

Measuring the loan market on a week-to-week basis takes about as much effort as pulling lint out of a belly button, and it's about as meaningful.

It's not intentional. It's "news." What's new? Week-to-week is new. Is it a development worthy of a headline? Probably not, but it's "new" and that's all that matters, so put it up there in 30-point type. The problem is, many consumers don't read the story. They never bother to find out that the market is still tanking. They read the headline and think "everything's rosy" and go on with their day.

And still we marvel at how foolish consumers seem when they're polled about the bubble. We can only blame ourselves.

Here's an excerpt from the Reuters story:

Mortgage applications rose for the first time in four weeks, led by a rebound in home purchase loans despite interest rates hitting their highest this year, an industry trade group said Wednesday.
The Mortgage Bankers Association said its seasonally adjusted index of mortgage application activity for the week ended April 28 increased 8.8% to 596.8.

The MBA's seasonally adjusted purchase mortgage index rose 11.3% to 433.3 from the previous week's 389.4, which was its lowest level since November 2003.

However, the index stayed below its year-ago level of 482.5.

Borrowing costs on 30-year fixed-rate mortgages, excluding fees, averaged 6.57%, up 0.04 percentage point from the previous week and rising to their highest level since the first week of June 2002, when the 30-year fixed-mortgage rate stood at 6.65%.

The group's seasonally adjusted index of refinancing applications increased 5.1% to 1,565.6. A year earlier the index stood at 2,061.2.

The refinance share of mortgage activity decreased to 35.2% of total applications from 36.7% the previous week, which was its lowest share of activity since June 2004.

-- The Boy in the Big Housing Bubble/Los Angeles and Beyond