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Economy in Brief

Mortgage Applications Inched Up
by Tom Moeller February 22, 2006

The total number of mortgage applications inched 0.8% last week after three consecutive weeks of sharp decline. The average level of applications this month is down 5.6% from January.

Purchase applications recovered 4.3% following three weeks of sharp decline. The average level of purchase applications in February is down 9,8% from the January 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.

Moving in the other direction last week, applications to refinance fell 4.0% w/w and this month's average is off 0.8% from January.

The effective interest rate on a conventional 30-year mortgage dipped to 6.47% versus an average 6.34% in January. The effective rate on a 15-year mortgage also dipped to 6.18% 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) 02/17/06 02/10/06 Y/Y 2005 2004 2003
Total Market Index 578.5 574.1 -20.5% 708.6 735.1 1,067.9
  Purchase 408.7 391.7 -2.2% 470.9 454.5 395.1
  Refinancing 1,571.4 1,636.7 -37.9% 2,092.3 2,366.8 4,981.8
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