US: MBA Mortgage Applications


Wed Oct 21 06:00:00 CDT 2015

Actual Previous
Composite Index - W/W Change 11.8% -27.6%
Purchase Index - W/W Change 16.0% -34.0%
Refinance Index - W/W Change 9.0% -23.0%

Highlights
Application volumes are swinging wildly week-to-week as the mortgage industry continues to implement new lending disclosure rules under TILA-RESPA. The purchase index jumped 16 percent in the October 16 week after falling 34 percent in the prior week with the refinancing index up 9.0 percent after falling 23.0 percent. Rates remain very low with the average 30-year fixed mortgage for conforming loans ($417,000 or less) down 4 basis points to 3.95 percent.

Definition
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.

Description
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.