U.S. Mortgage Applications Lowest Since 2000

The total number of mortgage applications fell 16.6% last week from the prior period to their lowest level since late-2000, according to the Mortgage Bankers Association. The decline pulled the October average 17.6% below September during which there had been a brief upturn in applications.

Applications for a mortgage to purchase a home tumbled 10.9% w/w and the decline pulled the month-to-date average 13.5% below September. Last month, purchase applications rose 8.7% from August during which these applications fell 6.1% m/m (-27.0% y/y). The August decline was accompanied by a 2.4% m/m decline (-12.7% y/y) in new plus existing single family home sales.

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. Figures covering sales of existing single-family home will be available this Friday while single-family home sales will be published early next week.

Applications to refinance a home mortgage tumbled 23.5% last week and the decline lowered applications so far this month 22.3% below the September average. During September, applications to refinance had risen 61.9% from August as 15-year mortgage rates fell briefly to 5.54%.

The effective interest rate on a conventional 15-year mortgage rose last week to 6.33% following an average of 6.01% last month. For a 30-year mortgage, rates fell w/w to 6.50%. 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 rose to 7.07% from 6.70% averaged 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 figures for weekly mortgage applications are available in Haver's USWEEKLY database.

Strategic Risk Management in an Interconnected World is the title of a speech given Monday by Fed Governor Randall S. Kroszner and it can be found here.

Unprecedented Times in our Economy* are remarks offered last week by Chicago Fed President Charles L. Evans and they are available here.

Italy’s consumer sentiment trend and retail sales trends continue to show each other the way lower. While some speak disparagingly about consumer surveys, it is clear that the consumer’s habits are bang in line with what the consumer is telling various surveyors.

In the quarter to date (two-months into Q3), nominal sales are still rising. But on the more important inflation-adjusted basis sales are dropping at a -3.4% annual rate - that’s quite weak.

Nominal sales trends have bee negative over three, six and twelve month horizons. In August weakness seems to have hit all the major categories together. While July showed a nominal sales gain, it is now clear that it was not heralding a period of better growth ahead That much has become clear in August.

Italy remains a trouble EMU economy, led by consumer sector weakness.