US: MBA Mortgage Applications


Wed Aug 03 06:00:00 CDT 2016

Actual Previous
Composite Index - W/W Change -3.5% -11.2%
Purchase Index - W/W Change -2.0% -3.0%
Refinance Index - W/W Change -4.0% -15.0%

Highlights
Purchase applications for home mortgages were down 2 percent in the July 29 week, with the purchase index posting the third weekly decline straight and falling to its lowest level since February. Despite a slight drop in interest rates, refinancing applications decreased 4 percent after falling a sharp 15 percent in the previous week. Year-on-year, the purchase index is now up only 6 percent, a significant retreat from the plus 30 readings seen in March. The average interest rate for 30-year fixed-rate mortgages on conforming loans ($417,000 or less) fell 2 basis points from the prior week to 3.67 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.