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Economy in Brief

U.S. Mortgage Applications Reverse Earlier Gains
by Tom Moeller  January 26, 2011

The Mortgage Bankers Association reported that overall mortgage applications fell 8.7% last week. This third consecutive weekly decline reversed most of the gains during the second half of last year and left them near the lowest since 2008. Applications to refinance a mortgage led the drop with a 15.3% w/w decline. Since August, applications have fallen by nearly one-half to the lowest since August 2009. Applications to purchase a home fell 8.7%, the sixth decline in the last seven weeks. Applications have fallen nearly 20% since early-December and were down 40% from the 2009 peak.. During the last ten years, the has been a 42% 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 from 61% before 2008.

Applications for fixed interest rate mortgage financing fell 13.1% last week and were near the lowest since 2009. Applications for variable-rate financing also fell hard to the lowest since last January.

The effective fixed interest rate on conventional 15-year mortgages rose to 4.43% last week. The latest was near the highest level since late-May and up from the October low of 3.88%. For 30-year mortgages the rate ticked up to an average 5.04%. Interest rates on fixed 15-year and 30-year mortgages are closely correlated (near-90%) with the rate on 10-year Treasury securities.

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

Forecasters Expect Solid Growth, Low Inflation in 2011 from the Federal Reserve Bank of St. Louis is available here.

BA Mortgage Applications (SA, 3/16/90=100) 1/21/11 1/14/11 1/7/11 Y/Y % 2010 2009 2008
Total Market Index 441.8 507.0 482.7 -13.9 659.3 736.4 642.9
 Purchase 172.3 188.8 192.4 -20.1 199.8 263.5 345.4
 Refinancing 2,025.2 2,390.7 2,219.2 -10.4 3,348.1 3,509.2 2,394.1
15-Year Mortgage Effective Interest Rate (%) 4.43 4.38 4.40 4.69
4.39 4.85 5.88
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