Is the Mortgage Market Slowing Down Again?

Things didn't look promising at the beginning of Friday. The Dow Jones Industrial Average (DJINDICES: ^DJI  ) started out considerably lower, only to sink further roughly an hour before lunch. Yet, somehow, someway, the blue-chip index mounted an ascent, to finish the day at almost the same place it started.

The conversation throughout much of the morning centered around two things. First, the Commerce Department reported that retail sales fell last month by 0.4%; economists surveyed by Bloomberg expected the figure to come in flat. And second, the University of Michigan's consumer sentiment survey tanked for the month of April, suggesting that Americans feel worse about the economy than had been anticipated.

The earnings releases from two of the nation's largest lenders, JPMorgan Chase (NYSE: JPM  ) and Wells Fargo (NYSE: WFC  ) were, perhaps, even more important. Make no mistake about it -- these companies had absolutely monster quarters. Wells Fargo earned $5.2 billion. That was an all-time record for the San Francisco-based bank. Meanwhile, JPMorgan's net income soared by 33%, and its mortgage origination volume shot up by 37%.

Yet, there were also warning signals hidden deep within both companies' earnings releases. As a headline in The Wall Street Journal declared, "Weak Loan Demand Hits Banks." It goes on to note that, "A mortgage-refinancing boom that helped fuel a surge in bank profits is fizzling, a sign of worsening health for the financial sector and the U.S. economy."

How could this be? Didn't JPMorgan underwrite more loans?

The truth is that it's simply too early to say whether or not the mortgage market is slowing down. Consider this: Wells Fargo originated $109 billion in mortgages over the three months ended March 31. That was $20 billion less than the same quarter in 2012, when it underwrote $129 billion worth. Alternatively, JPMorgan originated $52.7 billion in home loans. That was $14.7 billion more on a year-over-year basis. While these add up to a net decrease of roughly $5 billion between the two lenders, if JPMorgan's impressive gain is replicated by other lenders, then it's very possible that there could be more mortgage activity, not less. Then again, there may not be. The point is that it's simply too early to tell.

So, did the big banks disappoint? No. At least, not in any material way that I can discern.

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