Mortgage Applications Down

The index of mortgage applications compiled by the Mortgage Bankers Association fell another 10.7% last week following the 16.1% drop the week prior. Since the peak in late May mortgage applications are down by almost two-thirds.

Purchase applications have weakened. Last week mortgage applications for home purchase fell 4.9% and that added to a 10.3% decline the week prior. Since the peak in late May purchase applications have fallen 15.4%.

During the last ten years there has been a 54% correlation between the y/y change in purchase applications and the change in new plus existing home sales.

Applications to refinance continued to plummet. They fell 14.9% last week and by nearly one third in just the last two weeks. Refinancings were down 72.4% from the peak in late May.

Interest rates on a conventional 30-Year mortgage moved back up, rising 24 basis points w/w to 6.52%. That was versus a low for 30-Year financing of 5.31% in the second week of June. The effective rate on a 15-year mortgage rose to 5.91%, up 29 basis points w/w.

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 accounts for more than 40% of all applications processed each week by mortgage lenders.

For the August Senior Loan Officer Survey on Bank Lending Practices from the Federal Reserve Board, click here.

Visit the Mortgage Bankers Association site at www.mbaa.org.

The U.S. Government budget deficit deepened last month to $54.2B. That was versus of deficit of $29.2B in July '02. The deficit was slightly deeper than most analysts had expected.

The Federal government's deficit totaled $320.4B through the first ten months of this fiscal year. That is versus a deficit of $145.5B through the first ten months of FY2002.

Net receipts for the first ten months of FY03 fell 3.9% versus last year. Individual tax payments fell 6.9% and corporate income taxes were down 14.8%. Social insurance contributions rose 1.7% and excise taxes also rose just slightly.

Federal net expenditures rose 7.1% versus last fiscal year's first ten months. Defense spending surged 15.9% to 18.4% of the Federal budget. Spending on health programs was strong as well, up 11.3%, and spending on education surged 17.0% to 3.8% of the budget. Spending on income security rose 8.1% to 16.0% of the Federal budget and Medicare outlays rose 8.3% to 11.5% of the budget. Social Security outlays rose 4.1% to 21.9% of the budget. Interest expense fell 10.0% y/y.

For a report titled "Understanding State Budget Troubles" from the Federal Reserve Bank of San Francisco click here.