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Economy in Brief

Mortgage Applications Reversed Gain
by Tom Moeller December 20, 2006

In a complete reversal of the prior week's gain, the total number of mortgage applications fell 10.2% last week after the 11.5% jump during the prior period, according to the Mortgage Bankers Association.

Purchase applications fell 5.9% following an 8.7% rise during the prior week. Notwithstanding the decline, purchase applications remained in December 9.0% above the November average which rose 6.4% from the October level.

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 slid 14.6% after two weeks of double digit increase. In December applications to refinance are 9.8% higher than in November.

The effective interest rate on a conventional 30-year mortgage increased again w/w to 6.29% but the 6.22% average so far in December is down versus 6.36% during November. The peak for 30 year financing was 7.08% late in June. Rates for 15-year financing also increased to 6.07% but has averaged 5.99% this month versus 6.13% during November. 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.

Economic Inequality in the United States from the Federal Reserve Bank of San Francisco can be found here.

MBA Mortgage Applications (3/16/90=100) 12/15/06 12/08/06 Y/Y 2005 2004 2003
Total Market Index 647.6 721.2 8.9% 708.6 735.1 1,067.9
  Purchase 436.5 463.8 -3.7% 470.9 454.5 395.1
  Refinancing 1,968.8 2,304.4 38.8% 2,092.3 2,366.8 4,981.8
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