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Economy in Brief

Mortgage Applications Backpedal But Uptrend Remains Strong
by Tom Moeller   October 20, 2010

The Mortgage Bankers Association reported that mortgage applications declined 10.5% last week. The drop gave back most of the prior week's surge which was to the highest level since May 2009. Nevertheless, applications remained up by one-quarter from 12 months ago and were up roughly two-thirds from last year's lowest. Last week's total decline was led by an 11.2% w/w fall in applications to refinance a mortgage. Still, they remained up by more than one-half versus last year with the decline in interest rates. Applications to purchase a home fell 6.7% on top of an 8.5% decline during the prior week. That left applications off by more than one-third from last year, placing them at the lowest level since 1995. 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 ticked up to 3.99% last week. For 30-year mortgages the rate also rose to an average 4.50%, nearly the lowest since the early-1960s. 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 jumped w/w to 7.23% versus 6.74% at the end of last year.

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.

BA Mortgage Applications (SA, 3/16/90=100) 10/15/10 10/08/10 10/01/10 Y/Y % 2009 2008 2007
Total Market Index 803.4 897.2 782.6 25.3 736.4 642.9 652.6
 Purchase 169.7 181.8 198.7 -36.9 263.5 345.4 424.9
 Refinancing 4,491.1 5,060.3 4,180.8 59.9 3,509.2 2,394.1 1,997.9
15-Year Mortgage Effective Interest Rate (%) 3.99 3.88 4.01 4.68
4.85 5.9 6.2
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