hullabaloo about Jaime Dimon’s first loss aside, there was also some worrisome information about the U.S. housing market (and thus, recovery) in JP Morgan’s earnings announced this morning.
Check out this bit from the bank’s earnings report:
Mortgage origination were $US40.5 billion, down 14% from the prior year and 17% from the prior quarter, including purchase originations of $US20.0 billion, up 57% from the prior year and 15% from the prior quarter.
Additionally, mortgage application volume was down 45% from the prior year and 38% from the prior quarter.
The bank’s mortgage production pretax income came in at $US9o million, down $US997 million year over year. JPM said that this is “reflecting lower volumes and lower margins, partially offset by lower repurchase losses.”
OK so here’s what all that means.
JPM is cleaning up their balance sheet (lower repurchase losses), but overall their new mortgage business — mortgage originations — is taking a beating.
Purchase originations (new mortgages) jumped up 57% from Q3 2012 to $US20 billion, but it’s still not enough to keep JPM from taking a loss a loss in this sector.
It’s also still not more than the number of people refinancing for purchase. That business collapsed from $US31.6 billion in Q2 2013 to $US20.5 billion this quarter.
And again, overall, this business is in decline at JPM.
The worrisome part of that is that the decline seems to be coinciding with rising interest rates.
So if you’re concerned about the American consumer not being as resilient as we thought in the face of rising rates and the specter of less easing by the Federal Reserve, this is one to put in your pocket.
Check out JPM’s slide on mortgages from their earnings presentation below:
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