The total number of mortgage applications rose 3.2%% last week, after the sharp 8.4% decline the prior week according to the Mortgage Bankers Association.

Purchase applications recovered just 1.3% after declines of 8.4% and 7.0% during the two weeks.

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 recovered a larger 4.9%. Applications to refinance in January are 2.0% above the December average which was unchanged from November.

The effective interest rate on a conventional 30-year mortgage rose w/w to 6.50% the highest level this year and compared to the December average of 6.28%. The peak for 30 year financing was 7.08% late in June. Rates for 15-year financing also rose to 6.28%. 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 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.