The Mortgage Bankers Association reported that the total number of mortgage applications dropped again last week by 4.0% following a 5.7% decline the week prior. The decline was to the lowest level in nearly a year and dropped December 3.3% below November.

Purchase applications were notably weak. A 5.2% decline followed the prior week's 3.5% drop and was to the lowest level since late October. The December average of purchase applications fell to just a 0.5% gain versus November.

During the last ten years there has been a 50% correlation between the y/y change in purchase applications and the change in new plus existing single family home sales

Applications to refinance fell 1.6% on top of the prior week's 9.7% slide and lowered the December average 9.6% below November.

The effective interest rate on a conventional 30-year mortgage fell again to 6.45% from 6.53% the prior week. Rates averaged 6.52% in November and averaged 5.81% in June. The effective rate on a 15-year mortgage also fell to 6.07%. 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.