US: MBA Mortgage Applications

Wed Sep 20 06:00:00 CDT 2017

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Composite Index - W/W Change -9.7% 9.9%
Purchase Index - W/W Change -11.0% 11.0%
Refinance Index - W/W Change -9.0% 9.0%

Purchase applications for home mortgages fell a seasonally adjusted 11 percent in the September 15 week while refinancing applications fell 9 percent. The outsized decline in purchase applications entirely erased an increase of the same magnitude in the prior week, when results were adjusted for the Labor Day holiday. Unadjusted, the Purchase Index increased 10 percent and was 2 percent above the level in the same week a year ago. The refinance share of mortgage activity increased to 52.1 percent, up 1.1 percentage points from the prior week. The average interest rate on conforming 30-year fixed-rate mortgages ($424,100 or less) rose 1 basis point to 4.04 percent. At 2 percent, year-on-year growth in purchase applications shrank by 5 percentage points from the prior week. This does not bode well for a housing market which, despite a sharp decline in the South due to Hurricane Harvey, showed some signs of vigor in August according to Tuesday's Housing Starts report. Later this morning the release of the Existing Home Sales report for August will shed further light on the state of the U.S.housing market following Hurricane Harvey.

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.