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Economy in Brief

Mortgage Applications Reversed January Uptick
by Tom Moeller February 15, 2006

The total number of mortgage applications fell 7.3% last week, the third consecutive weekly decline. The declines have been sufficient to reverse virtually all of the 5.2% increase in applications during the month of January.

Purchase applications dropped a sharp 7.9% w/w and added to declines during the prior four months. The average level of purchase applications in February is down 17.6% from the peak month of July last year.

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 6.5% w/w to the lowest level in one month.

The effective interest rate on a conventional 30-year mortgage rose for the third straight week and settled at 6.52% versus an average 6.34% in January. The effective rate on a 15-year mortgage also rose to 6.21% versus an average 5.98% last month. Interest rates on 15 and 30 year mortgages are closely correlated (>90%) with the rate on 10 year Treasury securities and during the last ten years there has been a (negative) 82% correlation between purchase applications and the effective rate on a 30-Year mortgage.

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.

MBA Mortgage Applications (3/16/90=100) 02/10/06 02/03/06 Y/Y 2005 2004 2003
Total Market Index 574.1 619.3 -21.6% 708.6 735.1 1,067.9
  Purchase 391.7 425.1 -7.5% 470.9 454.5 395.1
  Refinancing 1,636.7 1,751.0 -35.3% 2,092.3 2,366.8 4,981.8
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