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Economy in Brief

Mortgage Applications Confirm Housing Soft in July
by Tom Moeller July 19, 2006

A 4.6% decline in the total number of mortgage applications last week reversed most of the increases during the prior two weeks and left applications early in July about even (+0.2%) with the June average which fell 1.5% from May.

Purchase applications fell a hard 6.2% w/w and left applications in July only 1.5% above the June average which fell 0.8% from May.

During the last ten years there has been a 58% correlation between the y/y change in purchase applications and the change in new plus existing single family home sales.

Applications to refinance fell 1.6% for the second week and the early July average was 2.2% below June. Refis during all of June fell 3.1% from the May average.

The effective interest rate on a conventional 30-year mortgage slipped w/w to 6.96% and the rate on 15-year financing also fell to 6.63%. Interest rates on 15 and 30 year mortgages are closely correlated (>90%) with the rate on 10 year Treasury securities.

During the last ten years there has been a (negative) 79% correlation between the level of applications for purchase and the effective interest 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) 07/14/06 07/07/06 Y/Y 2005 2004 2003
Total Market Index 540.8 566.8 -32.5% 708.6 735.1 1,067.9
  Purchase 398.5 425.0 -18.5% 470.9 454.5 395.1
  Refinancing 1,377.6 1,400.5 -47.4% 2,092.3 2,366.8 4,981.8
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