|Composite Index - W/W Change||-7.6%||-1.6%|
|Purchase Index - W/W Change||-3.0%||1.0%|
|Refinance Index - W/W Change||-12.0%||-4.0%|
Application activity is sputtering with MBA's composite index down a very steep 7.6 percent in the May 29 week for a 6th straight decline and the steepest decline since February. Purchase applications fell 3 percent in the week but are still up a respectable 14 percent year-on-year. Refinancing applications fell 12.0 percent in the week to their lowest level since May last year. Refinancing demand has been especially hurt by this year's rise in interest rates though rates were down in the latest week, with the average 30-year mortgage for conforming loans ($417,000 or less) down 5 basis points to 4.02 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.