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Economy in Brief

Mortgage Applications Lowest Since February
by Tom Moeller July 25, 2007

The total number of mortgage applications fell 3.6% last week to the lowest level since last February, according to the Mortgage Bankers Association. The decline was to a level 11.8% below the recent peak in March.

Purchase applications fell a hard 5.0%, the fourth decline in the last five weeks. The decline was to the lowest level since late April.

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 fell but by a moderate 1.4% after the prior week’s 4.9% advance.

The effective interest rate on a conventional 30-year mortgage fell slightly to 6.90% from 6.93% the prior week. Rates averaged 6.84% last month, up from 6.28% in December. The peak for 30 year financing was 7.08% late in June. Rates for 15-year financing similarly fell to 6.60% last week. 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 and 35 top lenders in the U.S. housing industry. Then it derives 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.

The Narrowing of the Male-Female Wage Gap from the Federal Reserve Bank of San Francisco can be found here.

MBA Mortgage Applications (3/16/90=100) 7/20/07 7/13/07 Y/Y 2006 2005 2004
Total Market Index 609.0 631.6 14.1% 584.2 708.6 735.1
  Purchase 424.2 446.5 9.0% 406.9 470.9 454.5
  Refinancing 1,692.9 1,717.4 22.2% 1,633.0 2,092.3 2,366.8
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