The total number of mortgage applications dropped 3.4% last week to the lowest level since January, according to the Mortgage Bankers Association. The decline pulled the average level in November 5.5% below October.

Applications to refinance, down 6.9%, fell sharply for the fifth consecutive week. The November average is down 14.0% from October.

Purchase applications fell 1.2% and reversed about half of the prior week's gain. Purchase applications in November are 0.6% ahead of October. 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.

The effective interest rate on a conventional 30-year mortgage slipped to 6.48% from 6.59% the prior week. The effective rate on a 15-year mortgage also fell to 6.11% from 6.18%. The interest rates 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.

Can U.S. Monetary Policy Fall (Again) into an Expectation Trap? from the Federal Reserve Bank of New York can be found here.