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Economy in Brief

Mortgage Applications Plummet
by Tom Moeller April 26, 2006

The total number of mortgage applications dropped 3.7% last week, down hard for the third consecutive period. In April applications are 2.4% below the March average which fell 1.0% from February.

Purchase applications fell another 4.4% w/w and that pulled the April average 0.7% below March 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 dropped 2.4% and in April are 4.9% below the March average.

The effective interest rate on a conventional 30-year mortgage eased slightly to 6.75% from 6.78% the prior week while the rate on 15-year financing slipped to 6.45%. 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) 04/21/06 04/14/06 Y/Y 2005 2004 2003
Total Market Index 548.6 569.6 -23.0% 708.6 735.1 1,067.9
  Purchase 389.4 407.4 -19.2% 470.9 454.5 395.1
  Refinancing 1,489.4 1,526.1 -27.4% 2,092.3 2,366.8 4,981.8
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