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Economy in Brief

Mortgage Applications Back Down
by Tom Moeller April 12, 2006

The 5.5% decline last week in the total number of mortgage applications reversed most of the increases during the prior two periods. The decline left applications at the start of April about equal to the March average which fell 1.0% from February.

Purchase applications fell 4.7% w/w but began the new month up 2.5% from the March average which rose 0.2% versus 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 slid 6.6% w/w and began April 3.9% below the March average.

The effective interest rate on a conventional 30-year mortgage increased another two basis points w/w to 6.74% while the rate on 15-year financing rose to 6.46%. 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) 04/07/06 03/31/06 Y/Y 2005 2004 2003
Total Market Index 579.4 612.8 -15.2% 708.6 735.1 1,067.9
  Purchase 417.7 438.2 -12.0% 470.9 454.5 395.1
  Refinancing 1,532.4 1,640.8 -19.3% 2,092.3 2,366.8 4,981.8
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