U.S. Mortgage Applications Down By One-third

The total number of mortgage applications ticked up 2.8% last week, but that followed two weeks of sharp decline, according to the Mortgage Bankers Association. As a result, applications in early August were 11.1% below the July average. In July, applications fell 2.9% from June following sharper m/m declines during most of this year.

In early August, the level of all mortgage applications was down by one-third from the year-ago level.

Purchase applications fell 1.8% last week which made up just a piece of the prior three weeks' sharp declines. That left applications for a mortgage to purchase a home, early this month, 8.0% below the July average.

During the last ten years there has been a 61% correlation between the y/y change in purchase applications and the change in new plus existing single family home sales.

Applications to refinance a home mortgage rose 4.4% after two weeks of strong decline. Applications began this month 15.7% below the July average.

The effective interest rate on a conventional 15-year mortgage ticked up w/w to 6.02% after two months when they averaged 5.94%. For a thirty year mortgage, rates were little changed at 6.41%. Interest rates on 15 and 30 year mortgages are closely correlated (>90%) with the rate on 10-year Treasury securities. For an adjustable rate 1-Year mortgage the rate slipped to 7.17% from a 7.20% average last month.

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 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 Rise and Fall of Subprime Mortgages from the Federal Reserve Bank of Dallas can be found here.

Historically German foreign orders have been the more volatile of the two series (foreign and domestic orders for MFG goods). The current drop is a steep one indeed. The aggressive growth rates show that growth fore both domestic and foreign orders is getting weaker as the time period to calculated growth gets shorter. This is accelerating weakness.

Quarter-to-date the growth rates are terribly weak. This series is now complete for Q2. In Q2 total orders are falling at a 15.4% annual lead by a 21.3% drop in Foreign orders. Sales are falling too as Consumer sales are off at an 11% pace even capital goods real sales are off at a 5.8% annual rate in the quarter. The German economy’s factory sector is weakening at a rapid pace.

Japan’s leading economic index fell in June after having a small uptick in May. Over three-months the index is higher but it is deeply weaker over 24-, 12- and 6-months. The OECD index that is not quite as up-to-date has been pointing to strength since late 2007.

The Cabinet Office reported that the trend in the composite coincident index points to a worsening of the economic cycle, downgrading the view a month earlier that suggested a possible change in the business cycle. The coincident index, which measures the current state of the economy, fell sharply to 101.7 from 103.3, in line with expectations. The leading index signals are not so clear cut with the OECD’s and Japan’s own indicators pointing in very different directions – a most unusual development.