Global| Jun 23 2010U.S. Mortgage Applications Recover But Purchase Apps Weak
by:Tom Moeller
|in:Economy in Brief
Summary
Low interest rates continue to prompt firm lending by mortgage bankers. For June so far, The Mortgage Bankers Association reported that applications were up modestly from May and were 13.3% higher than last year despite a slight [...]
Low interest rates continue to prompt firm lending by mortgage
bankers. For June so far, The Mortgage Bankers Association reported
that applications were up modestly from May and were 13.3% higher
than last year despite a slight decline last week.
Firm lending activity continued to reflect strong refinancings. Weekly applications for mortgage refinance fell last week. However, so far in June applications rose m/m and were 50% higher than last year.
In the back-wash of the government tax credit's expiration, applications to purchase a home fell 1.2% last week. The decline brought the total drop since a late-April peak to nearly 40%. During the last ten years there has been a 51% correlation between the y/y change in purchase applications and the change in new plus existing single family home sales. The correlation has lessened recently.
The effective fixed interest rate on conventional 15-year mortgages held steady at 4.44% last week, the cycle low. For 30-year mortgages the rate fell slightly to an average 4.96%. Interest rates on fixed 15-year and 30-year mortgages are closely correlated (near-90%) with the rate on 10-year Treasury securities. Rates on adjustable one-year mortgages rose slightly to 7.12%.
The drop in interest rates prompted increases in both fixed-rate (12.4% y/y and adjustable-rate (33.8% y/y) financing.
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 SURVEYW database.
Stressed, Not Frozen: The Federal Funds Market in the Financial Crisis from the Federal Reserve Bank of New York can be found here.
| BA Mortgage Applications (SA, 3/16/90=100) | 06/18/10 | 06/11/10 | 06/04/10 | Y/Y | 2009 | 2008 | 2007 |
|---|---|---|---|---|---|---|---|
| Total Market Index | 621.2 | 659.9 | 560.9 | 13.3% | 736.4 | 642.9 | 652.6 |
| Purchase | 177.9 | 180.0 | 167.8 | -36.5 | 263.5 | 345.4 | 424.9 |
| Refinancing | 3,208.5 | 3,461.5 | 2,859.5 | 51.6 | 3,509.2 | 2,394.1 | 1,997.9 |
| 15-Year Mortgage Effective Interest Rate (%) | 4.44 | 4.44 | 4.49 | 5.21(06/09) | 4.85 | 5.9 | 6.2 |
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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