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Economy in Brief

Mortgage Applications Stabilize
by Tom Moeller   October 27, 2010

The Mortgage Bankers Association reported that a 3.2% w/w rise in mortgage applications recovered some of the prior week's decline. The stabilization left the uptrend in applications intact. They were at their highest level since May 2009. Applications were up by roughly one-half from 12 months ago and were up roughly two-thirds from last year's low.  Last week's total increase reflected a 3.0% w/w increase in applications to refinance a mortgage. Still, they were nearly double their year-ago level with the decline in interest rates. Applications to purchase a home rose 3.9% following two weeks of decline. That left applications off by roughly one-third from last year, placing them near the lowest level since 1995. 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 slipped to 3.91% last week. For 30-year mortgages the rate also fell to an average 4.45%, nearly the lowest since the early-1960s. 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 slipped w/w to 7.19% versus 6.74% at the end of last year.

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.

BA Mortgage Applications (SA, 3/16/90=100) 10/22/10 10/15/10 10/08/10 Y/Y % 2009 2008 2007
Total Market Index 828.9 803.4 897.2 47.4 736.4 642.9 652.6
 Purchase 176.4 169.7 181.8 -30.8 263.5 345.4 424.9
 Refinancing 4,626.1 4,491.1 5,060.3 96.6 3,509.2 2,394.1 1,997.9
15-Year Mortgage Effective Interest Rate (%) 3.91 3.99 3.88 4.68
4.85 5.9 6.2
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