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Economy in Brief

Mortgage Applications Up With More Refinancing
by Tom Moeller January 18, 2006

The total number of mortgage applications rose 2.2% last week, the second up week following four consecutive weeks down. This year, mortgage applications are 2.1% higher than during December.

Higher applications to refinance accounted for all of last week's rise. A 9.9% w/w gain followed a like increase which opened the new year and lifted the level of refis 11.0% this month above December.

The effective interest rate on a conventional 30-year mortgage fell for the eighth week in the last nine to 6.31% versus an average 6.48% in December. The effective rate on a 15-year mortgage also fell to 5.94%, the second week below 6% since October. The interest rates on 15 and 30 year mortgages are closely correlated (>90%) with the rate on 10 year Treasury securities.

Purchase applications fell 3.0% following a 9.3% surge the prior week. The decline pulled purchase applications in January 1.1% below the December average.

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

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.

Are Banks Vulnerable to a Housing Bust from the Federal Reserve Bank of St. Louis is available here.

MBA Mortgage Applications (3/16/90=100) 01/13/06 01/06/06 Y/Y 2005 2004 2003
Total Market Index 613.3 600.1 -10.2% 708.6 735.1 1,067.9
  Purchase 443.9 457.4 -0.9% 470.9 454.5 395.1
  Refinancing 1,645.2 1,497.5 -19.7% 2,092.3 2,366.8 4,981.8
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