Quick Take: Mortgage Applications, International Trade, Stimulus Package

February 11, 2009

By Arun Barman, Research Economist

There was a seasonally adjusted 24.5 percent decrease in mortgage loan applications with the Market Composite Index falling from 795.4 to 600.6. The refinance portion of the index decreased 30.3 percent and the purchase portion of the index decreased 9.8 percent.
The Government Purchase Index decreased a seasonally adjusted 7.0 percent, while the Conventional Purchase Index decreased a seasonally adjusted 11.1 percent.
The share of refinance activity decreased from 73.2 percent of the total to 66.7 percent.
The average 30-year fixed mortgage rate fell from 5.28 percent to 5.19 percent.

The U.S. international trade balance fell to -$39.9 billion in December from a revised -$41.6 billion in November. Imports fell by more than exports, causing the deficit to fall. Historically, over the past several years the trade deficit has ranged from -$55 to -$65 billion.
For 2008 the trade deficit was $677.1 billion compared to $700.3 billion in 2007. In 2008 the trade deficit increased with China and Canada and decreased with the European Union.
Consumer demand has been very weak during this recession causing a fall in imports. Exports have been negatively impacted by a strong dollar and weaker foreign demand for U.S. goods and services.

The stimulus package is now in House-Senate negotiations to iron out any discrepancies.
The $15,000 Home Buyer Tax Credit remained in the Senate's bill.

The sharp decrease in mortgage loan applications is negative news for the housing market.
Rising unemployment and weak consumer spending is hurting the markets. Some money might be sitting on the sidelines waiting to see what housing related provisions are included in the stimulus bill.
The decrease in the December trade balance was to be expected with weak consumer demand, lower oil prices, and a stronger dollar.
Mortgage rates continue to remain near historic lows.

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