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Economy in Brief

Mortgage Applications Off Sharply
by Tom Moeller February 21, 2007

The total number of mortgage applications dropped 5.2%% last week to the lowest level since the last week in December, according to the Mortgage Bankers Association.

Purchase applications dropped 4.8% for the fifth down week in the last six.

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 fell 5.4% for the first down week in a month.

The effective interest rate on a conventional 30-year mortgage fell nine basis points to 6.37%. Rates averaged 6.40% last month and 6.28% in December. The peak for 30 year financing was 7.08% late in June. Rates for 15-year financing also fell to 6.14%, the lowest in a month. 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) 02/16/07 02/09/07 Y/Y 2006 2005 2004
Total Market Index 606.6 639.8 4.9% 584.2 708.6 735.1
  Purchase 381.4 400.7 -6.7% 406.9 470.9 454.5
  Refinancing 1,921.1 2,031.7 22.3% 1,634.0 2,092.3 2,366.8
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