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Economy in Brief

Mortgage Applications Fell Hard
by Tom Moeller November 1, 2006

The total number of mortgage applications fell a hard 3.0% last week and pulled the average number of applications down 0.6% during October, according to the Mortgage Bankers Association. That was the first m/m decline in total applications and followed a 5.6% increase during September.

Applications to refinance skidded 4.5% after a moderate rise the prior week but rose 3.5% for the month from September..

Purchase applications also fell. The 1.8% decline was the fifth in the last seven weeks and lowered the average level of purchase apps in October 3.6% below September 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. sharp increases late last month.

The effective interest rate on a conventional 30-year mortgage fell eleven basis points to 6.46%, the lowest level in about a month. The peak for 30 year financing was 7.08% late in June. The rate for 15-year financing also fell ten points to 6.19% versus 6.20% averaged during September and 6.24% 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 latest release from the Mortgage Bankers Association indicated that 4.4% of mortgage loans were past due during the second quarter of this year, down sharply from the 4.7% past due at the end of 2005. Foreclosure had been started, however, on an increased 4.43% of loans versus 4.36% at the 2003 low.

Homeownership in a High-Cost Region from the Federal Reserve Bank of Boston is available here.

MBA Mortgage Applications (3/16/90=100) 10/27/06 10/20/06 Y/Y 2005 2004 2003
Total Market Index 570.8 588.5 -11.7% 708.6 735.1 1,067.9
  Purchase 375.6 382.4 -14.2% 470.9 454.5 395.1
  Refinancing 1,709.2 1,790.4 -8.2% 2,092.3 2,366.8 4,981.8
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