US: MBA Mortgage Applications


Wed Jan 24 06:00:00 CST 2018

Actual Previous
Composite Index - W/W Change 4.5% 4.1%
Purchase Index - W/W Change 6.0% 3.0%
Refinance Index - W/W Change 1.0% 4.0%

Highlights
Undeterred by the highest interest rates in ten months, homebuyers led the 4.5 percent increase in mortgage application activity in the January 19 week, with purchase applications for home mortgages rising by a seasonally adjusted 6.0 percent from the previous week. The increase left the year-on-year gain in the unadjusted Purchase Index unchanged from the previous week's 7 percent due to a higher base in the corresponding week last year. Applications for refinancing, which tend to be more sensitive to interest rates, rose just 1 percent from the previous week, taking the refinancing share of mortgage activity down 0.8 percentage points to 49.4 percent. The average interest rate on 30-year fixed rate conforming mortgages ($453,100 or less) rose 3 basis points in the week to 4.36 percent, the highest level since March 2017. The recent acceleration in mortgage applications despite rising interest rates points to acceleration of the housing market strength seen in the last quarter.

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.