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Economy in Brief

Mortgage Applications Recovery Big
by Tom Moeller November 8, 2006

The total number of mortgage applications recovered 8.8% last week and more than made up the several sharp w/w declines during October, according to the Mortgage Bankers Association. The level of total applications started November 5.9% above the October average which fell 0.6% from September.

Applications to refinance jumped 11.0% to the highest level since late September. They began this month 6.7% above the October average which rose 3.5% from September.

Purchase applications in addition rose strongly, by 7.1%. The gain also was to the highest level since late September and pulled the opening level this month 5.4% ahead of the October average level. Purchase applications fell 3.6% last month from September on average.

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.

The effective interest rate on a conventional 30-year mortgage was unchanged w/w at 6.46%. The peak for 30 year financing was 7.08% late in June. The rate for 15-year financing ticked up to 6.20%. The peak for 15 year financing was 6.75% during June. 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.

Partisan Impacts on the Economy: Evidence from Prediction Markets and Close Elections from the Federal Reserve Bank of San Francisco is available here.

Alternative Mortgages: Managed Risk or Gamble? from the Federal Reserve Bank of Boston can be found here.

MBA Mortgage Applications (3/16/90=100) 11/03/06 10/27/06 Y/Y 2005 2004 2003
Total Market Index 620.9 570.8 -6.1% 708.6 735.1 1,067.9
  Purchase 402.2 375.6 -13.6% 470.9 454.5 395.1
  Refinancing 1,897.9 1,709.2 5.5% 2,092.3 2,366.8 4,981.8
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