by the Lendinglies Team
Wells Fargo’s Q4 earnings last year created an alarm because with rising interest rates, bad publicity, and a slew of lawsuits from investors, governmental entities and homeowners, Wells Fargo appeared to be in for a rough ride. Residential mortgage applications also plunged in Q4 by $25 billion from the prior quarter, while the mortgage origination pipeline plunged by nearly half to $30 billion. The scenario was starting to look like the all time record lows seen in late 2013.
It appears Well’s troubles have not improved with the results from 2017 Q1 coming in. Mortgage applications fell by another 23% to $59 billion. This is a new low since the financial crisis occurred. Mortgage origination’s are Wells Fargo’s signature product.
Although the Wells’ application pipeline wasn’t terrible at $28 billion, it reflects a troubling trend.
Mortgage originations plunged by 39% sequentially from $72 billion to only $44 billion but Wells spins this loss on higher interest rates and seasonal influences. Since this number lags the mortgage applications, analysts predict that Wells Fargo will see post-crisis lows in the second quarter.
What these number truly reveal, is that the average American consumer cannot afford to take out mortgages when rates rise by as little as 1%, which is where they peaked in the first quarter. The FED is predicting another rate increase in June. If the rate hikes continue it is fair to predict that the US domestic housing market will falter no matter what Pollyanna-ish predictions are coming from the fake media.
Anemic US consumer demand for mortgages is indicative of a recession and confirms the Fed is unable to raise rates without crashing the housing market. Furthermore, consumer loans also show a decline in every single category for one simple reason: lack of demand. Lack of demand stems from more than rising interest rates but the inability to take on more debt, flat wages, inflation, and an inflated housing market. People have once again over-leveraged themselves by purchasing homes that were artificially inflated by access to cheap money. It sounds a lot like 2008 again.
JPM, Citi and PNC also confirmed today that the loan market has slowed slowdown and that the US is quickly approaching an economic contraction caused by excessive debt accumulation. Trump is bullish on lower rates all of a sudden and bolstering the US Dollar. The only way out is another quantitative easing and that won’t happen this time around.
Source: Wells Fargo