Mortgage applications in the week of February 4th fell 5.5% after having risen 11.3% in the previous week. It was the second decline in the last three weeks.

In the past year the average weekly change has been -0.2%; in the past six months the average has tilted lower to -1.4%. From January 2000 until the end of 2005 applications increased an average of 0.8% per week; from January 2006 until the end of the decade the weekly change was 0.6%.

Refinancing accounted for 66.6% of mortgage application in the latest reporting week, slightly below the average over the past year of 73.2%. For the past ten years, from January 2001 until this February the weekly refinancing average has been 46.6%. The refinancing percentage of total applications was a bit lower in the first half of the last decade at 47.7%, than the second at 55.2%. At the peak of the housing bubble in 2005 and 2006 refinancing accounted for only 41.9% of new mortgage applications.

In general mortgage refinancing has been well correlated with changes in mortgage rates. Relatively small moves in rates have produced substantial increases or decreases in the percentage of refinancing normally at three to five months delay.

From February to mid-April 2009 rates for a 30-year fixed mortgage dropped from 5.44% to 4.88% in the Bankrate national average. Beginning in late June 2009 at 46.4%, refinancing then climbed to 75.9% by the middle of December 2009.

As rates then reversed and rose from 4.88% to 5.67%, April to June 2009, refinancing sank from 75.9% of mortgage totals in December 2009 to 51.9% the following April. The process repeated in 2010 though with almost no time lag. Rates fell from April to October, 5.23% to 4.30%, and refinancing rose from 51.9% in late April to 83.1% in October. Rates climbed again from November 2010 to the present and refinancing declined to the most recent 66.6%.

A similar pattern existed in 2002 and 2003. Rates fell from 6.66% in April 2002 to 4.95% in June 2003; refinancing rose from 35.9% in April 2002 to 76.9% in June 2003.

In comparison during the height of the housing bubble in 2005 and 2006 rising rates had a much smaller effect on the refinance percentage. Mortgage rates rose from 5.09% in early June 2005 to 6.37% in June 2006 but the refinancing rate fell off only 12.4% from 46.4% in June 2005 to 34.0% in July 2006. External events, primarily the frenzy in flipping houses for profit, absorbed market participants.

In a similar though opposite fashion, historically low mortgage rates, in 2010, averaging 4.79% for the year, have done little to revive the housing market.

Existing home sales which are around 80% of the US housing market averaged 4.92 million units annualized per month in 2010. This was lower than the 5.16 million average in 2009, barely better than the 4.89 million units in 2008 and almost 20% below the five year average from 2000 to 2005 of 6.02 million units. Unemployment and the threat of unemployment not mortgage rates remain the dominating external events for home purchasers.

Refinancing a home is a pragmatic decision; buying is emotional.