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Economy in Brief

U.S. Mortgage Applications Collapse
by Tom Moeller June 9, 2010

Still in the shadow of the expiration of the government's housing tax credit, the Mortgage Bankers Association reported that mortgage applications fell sharply last week reflecting a collapse in purchase applications. Overall, applications fell 12.2% in early June from the week earlier.

Applications to purchase a home dropped 5.7% w/w for the fifth consecutive week of sharp decline. 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. Mortgage refinancings also fell by 14.3% and reversed increases during the prior two weeks.

The effective fixed interest rate on conventional 15-year mortgages averaged 4.49% during the latest week, a new cycle low. For 30-year mortgages the rate also fell to an average 5.01%. 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 held roughly steady at 7.01%. 

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.

Economic and financial conditions and the federal budget is this morning's House testimony by Ben S. Bernanke and it can be found here.

BA Mortgage Applications (SA,3/16/90=100) 06/04/10 05/28/10 05/21/10 Y/Y 2009 2008 2007
Total Market Index 560.9 639.0 633.5 -8.2% 736.4 642.9 652.6
Purchase 167.8 178.0 185.7 -38.0 263.5 345.4 424.9
Refinancing 2,859.5 3,336.9 3,257.4 9.7 3,509.2 2,394.1 1,997.9
15-Year Mortgage Effective Interest Rate (%) 4.49 4.52 4.50 5.21 (06/09) 4.85 5.9 6.2
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