Seasonal Adjustments Muddle Mortgage Surveys

What do you do when a certain economic indicator is just so far out of whack that whether the weather is cold or whether the weather is hot, we'll be bewildered whatever the weather, whether we like it or not?

Such is the case with the Mortgage Bankers' Association's Quarterly Delinquency Survey, released today.

Foreclosed Home
Foreclosed Home

The overall total percentage of delinquent loans and loans in foreclosure stood at 14.01 percent in Q1 2010, on a non-seasonally adjusted basis, which is actually a decline from 15.02 percent from Q4 of 2009.

That big number is comprised of total loans past due and total loans in the foreclosure process.

The trouble is that those two totals rose, on a seasonally adjusted basis.

Now let's talk about the seasons. Historically, delinquencies peak in Q4, because people spend more money at the end of the year on things like heat and holiday expenses, and therefore can't make the monthly mortgage. So then the delinquencies drop off in Q1. Now they did drop off, non-seasonally adjusted, but not as far as they should have, leading the number cruncher adjuster types to have to show an increase.

"The model says the drop wasn't enough to offset what we would think would be a normal seasonal drop; therefore they think the underlying rate of delinquency has actually increased," says Jay Brinkmann, the MBA's chief economist. But he goes on: "...and there is some reason to question that first whether or not the fundamentals are just overwhelming the normal seasonal factors."

He cites the 90-day+ delinquency group, which has grown so large, because of delays from the various modification programs, that it too is skewing the numbers, and making it difficult to tell if the problem is getting better or worse.

But as always, Jay summed it up perfectly: "It is not unlike the oil spill in the gulf that we are looking at. You shut off what is coming out and creating the problem, but you still have an awful mess out there to try and deal with and clean up."

In another report out today from the Mortgage Bankers, the Weekly Applications Survey, you find that the "unique" situation in today's mortgage market (read massive government intervention) is messing with the numbers as well. The weekly purchase applications index fell 27.1 percent (!) seasonally adjusted and 27 percent non-seasonally adjusted. Now remember, we're in the Spring season, normally the high season for home buying.

Purchase applications fell off a cliff because the home buyer tax credit, which pulled demand forward into April, expired, and the hangover, while expected, is perhaps larger than expected.

No seasonal issues are going to change the fact that home buyers suddenly stopped buying homes last week.

This even as the rate on the 30-year fixed fell to 4.83 percent.

Questions? Comments?