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Economy in Brief

Mortgage Applications Surged
by Tom Moeller January 10, 2007

The total number of mortgage applications surged 16.6% last week, the strongest weekly increase since June 2005 according to the Mortgage Bankers Association.

Purchase applications jumped 16.2% and raised the level of applications in early January 11.3% above the December average which rose 4.7% from November.

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 also were strong and jumped 17.2%. Applications to refinance in early January were 1.2% above the December average which was unchanged from November.

The effective interest rate on a conventional 30-year mortgage fell w/w to 6.32% but remained up slightly from the December average of 6.28%. The peak for 30 year financing was 7.08% late in June. Rates for 15-year financing also fell sharply to 6.10%. 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) 01/05/07 12/29/06 Y/Y 2006 2005 2004
Total Market Index 671.1 575.6 11.8% 584.2 708.6 735.1
  Purchase 472.8 406.9 3.4% 406.9 470.9 454.5
  Refinancing 1,923.8 1,640.4 28.5% 1,634.0 2,092.3 2,366.8
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