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Economy in Brief

Mortgage Apps Down With Fewer For Purchase, Delinquencies Up
by Tom Moeller January 4, 2006

The total number of mortgage applications fell another 1.5% last week on top of the 6.8% drop the previous week. The decline rounded out 2005 when the average level fell 3.6% y/y after a nearly one third drop during 2004.

Purchase applications have been notably weak during the last several weeks. The 3.4% drop last week pulled the December average of purchase applications down 3.7% from November and the latest week was down 21.0% from the high during June.

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 recovered 8.3% of the prior week's 11.2% plunge yet the December average fell 13.8% from November.

The Mortgage Bankers Association also reported that through 3Q05, the percentage of mortgage loans past due crept higher to 4.44% versus the 1Q low 4.31%. The increase was due to higher delinquencies in the South. In the Northeast and in the West delinquencies are near or at the series' low. In the Midwest, however, a decline last quarter ran counter to the rising trend of the last ten years when the delinquency rate rose to roughly 5% from 3.6% in 1994.

The effective interest rate on a conventional 30-year mortgage fell slightly for the fourth straight week. At 6.42% the rate was down from 6.58% at the start of the month and averaged 6.48% in December versus a low average 5.81% in June. The effective rate on a 15-year mortgage was 6.05%. 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.

The minutes to the latest meeting of the Federal Open Market Committee can be found here.

MBA Mortgage Applications (3/16/90=100) 12/30/05 12/23/05 Y/Y 2005 2004 2003
Total Market Index 545.9 554.1 -9.9% 708.6 735.1 1,067.9
  Purchase 418.3 432.9 0.2% 470.9 454.5 395.1
  Refinancing 1,363.2 1,259.1 -19.9% 2,092.3 2,366.8 4,981.8
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