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Economy in Brief

Mortgage Applications Manage Late-March Recovery
by Tom Moeller April 5, 2006

The total number of mortgage applications rose for the second consecutive period. The 7.2% increase last week limited the average decline during March to 1.0% after a 6.3% drop during February.

Purchase applications jumped 8.4% at month end and the average level during March ticked up 0.2% after a 10.2% decline during February.

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 also recovered with a 5.3% increase last week though the average March level fell 2.4% m/m after a 2.0% February drop.

The effective interest rate on a conventional 30-year mortgage rose sharply. The sixteen basis point increase w/w lifted the effective rate to 6.72% and the rate on 15-year financing likewise surged to 6.43%, its highest since June 2002. 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.

A New Perspective on Policy, yesterday's speech by Dallas Federal Reserve Bank President & CEO Richard W. Fisher, is available here.

MBA Mortgage Applications (3/16/90=100) 03/31/06 03/24/06 Y/Y 2005 2004 2003
Total Market Index 612.8 571.7 -4.9% 708.6 735.1 1,067.9
  Purchase 438.2 404.1 -1.7% 470.9 454.5 395.1
  Refinancing 1,640.8 1,558.4 -8.8% 2,092.3 2,366.8 4,981.8
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