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Economy in Brief

U.S. Disposable Personal Income& Spending Continue Firm
by Tom Moeller December 09, 2009

Low interest rates continue to support the housing market. The Mortgage Bankers Association reported that mortgage applications rose 8.5% last week, the second week of firm gain that continued what has been a 50% rise since the late-June low.

Applications to refinance mortgages jumped 11.1% last week. They were up 8% from November and were more than double the June low due to rate declines. Applications to purchase a home have not shared that degree of strength. They did rise for the third consecutive week and were up 9.8% from November, but were down by 21.1% from early- October. The volatility in the numbers likely reflects the expiration of an up-to $8,000 Federal tax credit for first-time homebuyers which has since been extended to April of next year. During the last ten years there has been a 51% correlation between the y/y change in purchase applications and the change in new plus existing single family home sales. The correlation has lessened recently.

The effective fixed interest rate on conventional 15-year mortgages fell slightly last week to 4.59%. That equaled the November low and was down from the June average of 5.21%. For 30-year mortgages the rate ticked up last week to 5.12% from a November average of  5.06%. Rates reached a high of 5.79% in early-June. Interest rates on fixed 15-year and 30-year mortgages are closely correlated (near-90%) with the rate on 10-year Treasury securities. Rates on adjustable one-year mortgages fell to 6.64% last week from a November average of 6.81%.

During the last twelve months, the number of fixed-rate mortgage applications has fallen by 21.5% and adjustable-rate mortgage applications have risen by two and one-half times.

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.

Keys to Successful Neighborhood Stabilization is today's speech by Federal Reserve Board Governor Elizabeth A. Duke and it can be found here.

MBA Mortgage Applications (SA, 3/16/90=100) 12/04/09 11/27/09 Y/Y 2008 2007 2006
Total Market Index 665.6 613.7 -18.6% 642.9 652.6 584.2
  Purchase 241.5 232.3 -19.4 345.4 424.9 406.9
  Refinancing 3,185.9 2,866.4 -18.4 2,394.1 1,997.9 1,634.0
15-Year Mortgage Effective Interest Rate (%) 4.59% 4.60% 5.24% (12/08) 5.9% 6.2% 6.3%

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