US: MBA Mortgage Applications

Wed Oct 18 06:00:00 CDT 2017

Actual Previous
Composite Index - W/W Change 3.6% -2.1%
Purchase Index - W/W Change 4.0% -0.1%
Refinance Index - W/W Change 3.0% -4.0%

Purchase applications for home mortgages rose a seasonally adjusted 4.0 percent in the October 13 week, lifting the year-on-year rate by 2 percentage points to 9.0 percent in what is a positive signal for underlying home sales. Refinancing activity rebounded from an extended slide and was up 3.0 percent from the previous week, but its share of total activity nevertheless fell 0.4 percentage points to 48.6 percent. The week's results included adjustments for the Columbus Day holiday, and on an unadjusted basis, purchase applications fell 6.0 percent compared to the previous week. Interest rates edged lower, with the average rate on conforming 30-year fixed mortgages ($424,100 or less) down 2 basis points to 4.14 percent. The week's strong results bode well for the recovery of a housing market that stumbled during the third quarter, partly as a result of hurricanes. Later this morning, the release of the Housing Starts data for September will give further insight into the nation's housing sector.

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.