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Economy in Brief

Mortgage Applications Down Further
by Tom Moeller August 2, 2006

A 1.2% decline last week in the total number of mortgage applications extended the recent decline to three consecutive weeks. Applications for all of July fell 1.9% from June when applications fell 1.5% from May.

Lower purchase applications led last week's decline with 3.3% drop which pulled the July average 2.1% below June, the third consecutive down month.

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 added 2.3% to the prior week's 0.6% recovery to limit the decline during all of July to 1.8% versus June. Refis fell 3.1% during June from the May average.

The effective interest rate on a conventional 30-year mortgage fell nine basis points w/w to 6.82%. The peak for 30 year financing was 7.08% late in June. The rate on 15-year financing also fell to 6.53% 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.

In July, 35.4% of all loan applications were to refinance, down from 44.2% last July.

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) 07/28/06 07/21/06 Y/Y 2005 2004 2003
Total Market Index 527.6 533.8 -29.8% 708.6 735.1 1,067.9
  Purchase 376.2 389.0 -23.9% 470.9 454.5 395.1
  Refinancing 1,417.2 1,385.2 -37.0% 2,092.3 2,366.8 4,981.8
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