Global| Aug 30 2006Mortgage Applications Portend Further Weakness in Housing
by:Tom Moeller
|in:Economy in Brief
Summary
The total number of mortgage applications slipped another 0.9% last week according to the Mortgage Bankers Association. The average level of applications in August rose 2.9% from July. Last week's decline was led by a 1.6% drop in [...]
The total number of mortgage applications slipped another 0.9% last week according to the Mortgage Bankers Association. The average level of applications in August rose 2.9% from July.
Last week's decline was led by a 1.6% drop in purchase applications and applications are down 17.8% from the weekly high in January. It was sixth decline in the last seven weeks and lowered purchase apps in August 3.5% below the July average. That was the fourth consecutive m/m decline.
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.
Applications to refinance were roughly unchanged w/w and rose 13.3% in August versus July.
The effective interest rate on a conventional 30-year mortgage was about unchanged at 6.60% versus 6.58% the prior week. The peak for 30 year financing was 7.08% late in June. The rate on 15-year financing also remained unchanged at 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.
| MBA Mortgage Applications (3/16/90=100) | 08/25/06 | 08/18/06 | Y/Y | 2005 | 2004 | 2003 |
|---|---|---|---|---|---|---|
| Total Market Index | 556.5 | 561.5 | -23.0% | 708.6 | 735.1 | 1,067.9 |
| Purchase | 375.9 | 382.2 | -20.1% | 470.9 | 454.5 | 395.1 |
| Refinancing | 1,609.2 | 1,608.5 | -26.4% | 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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