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Economy in Brief

U.S. Mortgage Applications Recovered Last Week; Off Two-Thirds From Peak
by Tom Moeller October 29, 2008

The total number of mortgage applications rose 28.5% last week and that recovered all of the prior period's decline, according to the Mortgage Bankers Association. Nevertheless, the October average fell 20.0% from September and applications were two-thirds below their peak reached this past January.

Last week, applications for a mortgage to purchase a home made up most of the prior week's decline with an 8.5% rise. For October so far, however, purchase applications reversed most of the prior month's gain with a 13.3% decline. During the latest week purchase applications were down 43% from their 2005 peak.

During the last ten years there has been a 61% correlation between the y/y change in purchase applications and the change in new plus existing single family home sales. Figures covering sales of existing single-family home will be available this Friday while single-family home sales will be published early next week.

Applications to refinance a home mortgage recovered most of the prior week's decline with a 28.5% increase but applications in October overall remained 20% below September. During September, applications to refinance had risen 61.9% from August as 15-year mortgage rates fell briefly to 5.54%.

The effective interest rate on a conventional 15-year mortgage slipped last week to 6.30% following an average of 6.01% last month. For a 30-year mortgage, rates slipped w/w to 6.48%. Interest rates on 15 and 30 year mortgages are closely correlated (>90%) with the rate on 10-year Treasury securities. For an adjustable rate 1-Year mortgage the rate also slipped w/w to 6.95% after having averaged 6.70% last month.

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.

The figures for weekly mortgage applications are available in Haver's SURVEYW database.

MBA Mortgage Applications (3/16/90=100) 10/24/08 10/17/08 Y/Y 2007 2006 2005
Total Market Index 476.7 408.1 -30.1% 652.6 584.2 708.6
  Purchase 303.1 279.3 -26.6% 424.9 406.9 470.9
  Refinancing 1,489.4 1,158.8 -33.8% 1,997.9 1,634.0 2,092.3
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