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Economy in Brief

Mortgage Applications Recovered Last Week
by Tom Moeller June 14, 2006

The total number of mortgage applications rose 7.0% last week and recovered most of the prior three weeks' declines. Nevertheless, applications in early June remained 1.4% below the May average which fell 2.2% from April.

Applications to refinance surged 10.6% following several weeks of decline. Therefore, refis in June were still 2.6% below the May average which fell 4.1% from April.

Purchase applications rose 4.8% following stability w/w the prior period. In early June purchase applications were 0.9% below the May average which fell 0.8% versus April.

During the last ten years there has been a negative 80% correlation between the interest rate level on 30-year financing and purchase applications while during those 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.

The effective interest rate on a conventional 30-year mortgage was stable w/w at 6.83%. Rates began June about even with the May average of 6.86% but were up sharply from the 5.81% low last June. The rate on 15-year financing rose to 6.55% from 6.52% the prior week. 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.

Alternative Mortgages from the Federal Reserve Bank of Boston can be found here.

MBA Mortgage Applications (3/16/90=100) 06/09/06 06/02/06 Y/Y 2005 2004 2003
Total Market Index 571.9 534.4 -35.5% 708.6 735.1 1,067.9
  Purchase 414.6 395.6 -21.7% 470.9 454.5 395.1
  Refinancing 1,499.4 1,356.0 -49.5% 2,092.3 2,366.8 4,981.8
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