Global| Aug 23 2006Mortgage Applications Lackluster, Rates Down
by:Tom Moeller
|in:Economy in Brief
Summary
The total number of mortgage applications ticked up 0.1% last week after firms gains during the prior two weeks. As a result of the earlier increases, the average level of applications in August is up 3.0% from July. Again, recent [...]
The total number of mortgage applications ticked up 0.1% last week after firms gains during the prior two weeks. As a result of the earlier increases, the average level of applications in August is up 3.0% from July.
Again, recent gains were led by higher applications to refinance which rose 1.3% for the fifth consecutive weekly increase. Refis in August are 12.6% higher than in July.
Moving in the other direction, purchase applications fell 1.0% last week for the fifth decline in the last six weeks. Purchase apps in August are 2.9% below the July average.
During the last ten years there has been a 58% correlation between the y/y change in purchase applications and the change in new plus existing single family home sales.
The effective interest rate on a conventional 30-year mortgage fell sharply to 6.58% from 6.73% the prior week. The peak for 30 year financing was 7.08% late in June. The rate on 15-year financing also fell ten basis points to 6.32% and the peak rate was 6.75%. Interest rates on 15 and 30 year mortgages are closely correlated (>90%) with the rate on 10 year Treasury securities.
During the last ten years there has been a (negative) 79% correlation between the level of applications for purchase and the effective interest rate on a 30-year mortgage.
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. Visit the Mortgage Bankers Association site here.
A Trend and Variance Decomposition of the Rent-Price Ratio in Housing Markets
from the Federal Reserve Board can be found here.
| MBA Mortgage Applications (3/16/90=100) | 08/18/06 | 08/11/06 | Y/Y | 2005 | 2004 | 2003 |
|---|---|---|---|---|---|---|
| Total Market Index | 561.5 | 561.2 | -25.7% | 708.6 | 735.1 | 1,067.9 |
| Purchase | 382.2 | 385.9 | -21.7% | 470.9 | 454.5 | 395.1 |
| Refinancing | 1,608.5 | 1,587.5 | -30.5% | 2,092.3 | 2,366.8 | 4,981.8 |
Tom Moeller
AuthorMore in Author Profile »Prior to joining Haver Analytics in 2000, Mr. Moeller worked as the Economist at Chancellor Capital Management from 1985 to 1999. There, he developed comprehensive economic forecasts and interpreted economic data for equity and fixed income portfolio managers. Also at Chancellor, Mr. Moeller worked as an equity analyst and was responsible for researching and rating companies in the economically sensitive automobile and housing industries for investment in Chancellor’s equity portfolio. Prior to joining Chancellor, Mr. Moeller was an Economist at Citibank from 1979 to 1984. He also analyzed pricing behavior in the metals industry for the Council on Wage and Price Stability in Washington, D.C. In 1999, Mr. Moeller received the award for most accurate forecast from the Forecasters' Club of New York. From 1990 to 1992 he was President of the New York Association for Business Economists. Mr. Moeller earned an M.B.A. in Finance from Fordham University, where he graduated in 1987. He holds a Bachelor of Arts in Economics from George Washington University.
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