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Economy in Brief

Mortgage Applications Down on Lower Refis
by Tom Moeller November 29, 2006

The total number of mortgage applications repeated the prior period's decline and fell 3.9% last week, according to the Mortgage Bankers Association.

Last week's decline was due to a collapse in applications to refinance which doubled the prior week's drop and fell 9.6%.The decline reversed the gains logged earlier in November.

Purchase applications recovered about half of the prior week's decline with a 1.3% increase. On average, November purchase applications rose 6.4% from the October 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 at 6.32%. The peak for 30 year financing was 7.08% late in June. The rate for 15-year financing, however, slipped to 6.08%. 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 covers roughly 50% of all U.S. residential mortgage applications processed each week by mortgage banks, commercial banks and thrifts. Visit the Mortgage Bankers Association site here.

MBA Mortgage Applications (3/16/90=100) 11/17/06 11/10/06 Y/Y 2005 2004 2003
Total Market Index 599.0 623.6 -4.0% 708.6 735.1 1,067.9
  Purchase 406.7 401.4 -14.6% 470.9 454.5 395.1
  Refinancing 1,749.6 1,935.3 17.9% 2,092.3 2,366.8 4,981.8
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