|Composite Index - W/W Change||14.2%||49.1%|
|Purchase Index - W/W Change||-3.0%||24.0%|
|Refinance Index - W/W Change||22.0%||66.0%|
Completely wild can be the swings in weekly data -- and especially MBA's weekly data where the refinance index surged 22.0 percent in the January 16 week while the purchase index fell 3.0 percent. Given the extravagant week-to-week readings a look at year-on-year readings is very important and for the year-on-year reading for purchase applications shows a less than dramatic gain of plus 3.0 percent. But improvement should be no surprise given the ongoing decline in mortgage rates where the average 30-year fixed rate for conforming loans ($417,000 or less) fell, after tumbling 12 basis points in the prior week, another whole 9 basis points to 3.80 percent.
The Mortgage Bankers' Association compiles various mortgage loan indexes. The purchase applications index measures applications at mortgage lenders. This is a leading indicator for single-family home sales and housing construction.
This provides a gauge of not only the demand for housing, but economic momentum. People have to be feeling pretty comfortable and confident in their own financial position to buy a house. Furthermore, this narrow piece of data has a powerful multiplier effect through the economy, and therefore across the markets and your investments. By tracking economic data such as the Mortgage Bankers Association purchase applications, investors can gain specific investment ideas as well as broad guidance for managing a portfolio.
Each time the construction of a new home begins, it translates to more construction jobs, and income which will be pumped back into the economy. Once a home is sold, it generates revenues for the home builder and the realtor. It brings a myriad of consumption opportunities for the buyer. Refrigerators, washers, dryers and furniture are just a few items new home buyers might purchase. The economic "ripple effect" can be substantial especially when you think a hundred thousand new households around the country are doing this every month.
Since the economic backdrop is the most pervasive influence on financial markets, housing construction has a direct bearing on stocks, bonds and commodities. In a more specific sense, trends in the MBA purchase applications index carry valuable clues for the stocks of home builders, mortgage lenders and home furnishings companies.
CME Group is the world's leading and most diverse derivatives marketplace. The company is comprised of four Designated Contract Markets (DCMs). Further information on each exchange's rules and product listings can be found by clicking on the links to CME, CBOT, NYMEX and COMEX.