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Economy in Brief

Mortgage Applications Lower Again
by Tom Moeller February 8, 2006

The total number of mortgage applications fell again last week, by 1.2%, following the prior period's 5.1% drop. Mortgage applications during all of January rose 5.2% following three months of sharp decline but began February down 0.9% m/m.

Purchase applications fell by another 2.4% w/w. The average level in January dropped 0.6% from December and began February 6.1% below the prior month.

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 ticked up 0.2% w/w and started the month 5.1% above January following a 17.7% rise versus December.

The effective interest rate on a conventional 30-year mortgage added 5 basis points to the prior week's 15 point increase and settled at 6.49% versus an average 6.34% in January. The effective rate on a 15-year mortgage also rose to 6.16%. 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.

Longer-Term Perspectives on the Yield Curve and Monetary Policy from the Federal Reserve Bank of Kansas City is available here.

MBA Mortgage Applications (3/16/90=100) 02/03/06 01/27/06 Y/Y 2005 2004 2003
Total Market Index 619.3 626.8 -15.8% 708.6 735.1 1,067.9
  Purchase 425.1 435.7 -4.4% 470.9 454.5 395.1
  Refinancing 1,751.0 1,747.2 -28.0% 2,092.3 2,366.8 4,981.8
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