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Economy in Brief

Life in Housing - Mortgage Applications Recover
by Tom Moeller December 6, 2006

The total number of mortgage applications rose 8.1% last week and recovered all of the sharp declines during the prior two weeks, according to the Mortgage Bankers Association.

Purchase applications jumped 4.9%, the largest weekly increase in a month, spurred by lower interest rates & price concessions. During November purchase applications rose 6.4% from the October level and in early December purchase applications are 5.1% above the November 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.

Applications to refinance jumped 13.7% and recovered most of the prior two weeks' sharp decline.

The effective interest rate on a conventional 30-year mortgage dropped sixteen basis points to 6.16%. The peak for 30 year financing was 7.08% late in June. Rates for 15-year financing also fell sharply to 5.91%, the first time below 6% since January. 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) 12/01/06 11/24/06 Y/Y 2005 2004 2003
Total Market Index 647.6 599.0 -1.4% 708.6 735.1 1,067.9
  Purchase 426.6 406.7 -13.8% 470.9 454.5 395.1
  Refinancing 1,989.7 1,749.6 24.6% 2,092.3 2,366.8 4,981.8
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