US: MBA Mortgage Applications

Wed Sep 06 06:00:00 CDT 2017

Actual Previous
Composite Index - W/W Change 3.3% -2.3%
Purchase Index - W/W Change 1.0% -3.0%
Refinance Index - W/W Change 5.0% -2.0%

Declining mortgage rates caught the flagging attention of home buyers in the September 1 week, with purchase applications for home mortgages rising by 1 percent from the prior week following 3 weeks of declines. The modest increase put the Purchase Index 5 percent above the level a year ago. Lower rates were a bigger enticement to home owners, whose refinancing activity rose 5 percent in the week. The refinancing share of mortgage activity continued to rise, increasing by 1.5 percentage points to 50.9 percent of total applications, the highest level since January 2017. The average interest rate on 30-year fixed rate conforming mortgages ($424,100 or less) fell 5 basis points to 4.06 percent, the lowest level since November 2016. The week's uptick in purchase applications keeps alive hopes that cheaper financing could still energize the housing market after a lackluster spring and summer.

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.