US: MBA Mortgage Applications

Wed Sep 23 06:00:00 CDT 2015

Actual Previous
Composite Index - W/W Change 13.9% -7.0%
Purchase Index - W/W Change 9.0% -4.0%
Refinance Index - W/W Change 18.0% -9.0%

Rate declines tied to last week's post-FOMC surge into the Treasury market likely drove prospective home buyers and existing home borrowers into the mortgage market, according to the Mortgage Bankers Association whose data soared in the September 18 week. The purchase index jumped 9.0 percent in the week with the refinance index up 18.0 percent. Rates moved sharply higher early in the week then broke lower at week's end. Week-to-week, however, the average rate for conforming loans ($417,000 or less) was unchanged at 4.09 percent. Today's report is pointing to a pickup for housing sales and is especially notable for how closely borrowers are reacting to FOMC activity. Watch Thursday for the new home sales report for August.

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.