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Economy in Brief

Mortgage Applications Fell Again
by Tom Moeller October 18, 2006

According to the Mortgage Bankers Association, the total number of mortgage applications fell 2.2% last week for the third decline in the last four weeks. Applications this month are just 0.5% higher than during September.

A 0.4% rise in purchase applications recovered just a piece of the prior week's 5.3% w/w skid and that left the level of purchase apps in early October 3.0% below the September average which rose 3.2% from August.

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 about repeated the prior week's decline and fell 5.3%. Refis in October are 5.2% higher than the September average due to sharp increases late last month.

The effective interest rate on a conventional 30-year mortgage rose for the third consecutive week. The seven basis point increase to 6.56% left rates at the highest in a month. The peak for 30 year financing was 7.08% late in June. The rate for 15-year financing also rose ten basis points w/w to 6.28% versus 6.20% averaged last month. 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.

The Federal Home Loan Bank System: The “Other” Housing GSE from the Federal Reserve Bank of Atlanta is available here.

MBA Mortgage Applications (3/16/90=100) 10/13/06 10/06/06 Y/Y 2005 2004 2003
Total Market Index 585.8 599.1 -20.6% 708.6 735.1 1,067.9
  Purchase 384.7 383.7 -23.7% 470.9 454.5 395.1
  Refinancing 1,758.2 1,857.0 -16.1% 2,092.3 2,366.8 4,981.8
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