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Economy in Brief

Mortgage Applications Wilt Under Summer Heat
by Tom Moeller July 26, 2006

The total number of mortgage applications fell another 1.3% last week and pulled applications so far in July down 1.0% from the prior month's average. Applications in June fell 1.5% from May.

Purchase applications added 2.4% to the prior week's 6.2% steep decline. Therefore, in July the average number of applications are 0.3% below June 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 recovered 0.6% of the 1.6% declines during the prior two weeks. The small increase left the July average 2.3% below the prior month and refis during all of June fell 3.1% from the May average.

The effective interest rate on a conventional 30-year mortgage fell five basis points w/w to 6.91%. The peak for 30 year financing was 7.08% late in June. The rate on 15-year financing also fell six basis points to 6.57% and the peak rate was 6.75%. 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) 07/21/06 07/14/06 Y/Y 2005 2004 2003
Total Market Index 533.8 540.8 -29.2% 708.6 735.1 1,067.9
  Purchase 389.0 398.5 -19.8% 470.9 454.5 395.1
  Refinancing 1,385.2 1,377.6 -40.3% 2,092.3 2,366.8 4,981.8
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