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Economy in Brief

Mortgage Applications Fell With Fewer New Purchases
by Tom Moeller October 5, 2005

The total number of mortgage applications fell 1.1% last week following the sharp 6.6% drop the prior week, according to the Mortgage Bankers Association. In September, applications did rise 0.2% from August but the average level was down 6.7% from a recent peak in June.

Purchase applications fell for the third consecutive week. A 1.9% decline reduced the gain in September to 1.0% versus August. During the last ten years there has been a 49% correlation between the y/y change in purchase applications and the change in new plus existing single family home sales.

Mortgage applications to refinance were roughly unchanged w/w after the 10.5% plunge the prior week. For September, refis fell 0.7% m/m following a 10.6% drop in August.

The effective interest rate on a conventional 30-year mortgage rose to 6.18% from 6.09% the week prior and the effective rate on a 15-year mortgage rose to 5.83%. The interest rate on 15 and 30 year mortgages are closely correlated (>90%) with the rate on 10 year Treasury securities.

The Mortgage Bankers Association surveys between 20 to 35 of the top lenders in the U.S. housing industry to derive its refinance, purchase and market indexes. The weekly survey accounts for more than 40% of all applications processed each week by mortgage lenders. Visit the Mortgage Bankers Association site here.

House Prices and Monetary Policy: A Cross-Country Study from the Board of Governors of the Federal Reserve System is available here.

Yesterday's speeches from several Federal Reserve Board officials contained comments on the economic outlook, the business cycle and Fed Policy. Dallas Fed President Fisher's comments can be found here, St. Louis Fed President Poole's speech is here and Philadelphia Fed President Santomero's comments are available here.

MBA Mortgage Applications (3/16/90=100) 09/30/05 09/23/05 Y/Y 2004 2003 2002
Total Market Index 713.5 721.2 -1.6% 735.1 1,067.9 799.7
  Purchase 473.8 483.1 3.2% 454.5 395.1 354.7
  Refinancing 2,107.4 2,106.6 -7.2% 2,366.8 4,981.8 3,388.0
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