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Economy in Brief

Mortgage Applications Recover Some
by Tom Moeller March 29, 2006

Last week, the total number of mortgage applications recovered 1.2% following two weeks of decline. Nevertheless, applications in March are 2.4% below the February average which fell 6.3% m/m.

Purchase applications recovered all of the prior week's decline with a 2.7% rise but the average level during March remained down 1.6% from the February average.

During the last ten years there has been a 54% correlation between the y/y change in purchase applications and the change in new plus existing single family home sales.

Applications to refinance fell for the third straight week, off 1.0% w/w and the March level is 3.1% below the February average which fell 2.0% from January.

The effective interest rate on a conventional 30-year mortgage rose two basis points to 6.56% and the rate on 15-year financing ticked up to 6.28%. 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.

Money and Modern Banking without Bank Runs from the Federal Reserve Bank of New York is available here.

MBA Mortgage Applications (3/16/90=100) 03/24/06 03/17/06 Y/Y 2005 2004 2003
Total Market Index 571.7 565.0 -15.2% 708.6 735.1 1,067.9
  Purchase 404.1 393.6 -14.2% 470.9 454.5 395.1
  Refinancing 1,558.4 1,574.5 -16.1% 2,092.3 2,366.8 4,981.8
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