US: MBA Mortgage Applications

Wed Nov 01 06:00:00 CDT 2017

Actual Previous
Composite Index - W/W Change -2.6% -4.6%
Purchase Index - W/W Change -1.0% -6.0%
Refinance Index - W/W Change -5.0% -3.0%

Purchase applications for home mortgages fell by a seasonally adjusted 1.0 percent in the October 27 week, posting the second weekly decline in what may be a reaction to another uptick in mortgage rates. Refinancing applications, which tend to be more sensitive to interest rate movements, fell by 5 percent from the previous week, taking the refinancing share of total application activity down 0.8 percentage points to 48.7 percent. The average interest rate on conforming 30-year fixed-rate mortgages ($424,100 or less) rose 4 basis points to 4.22 percent, the highest rate since July. Despite the weekly decline, purchase applications remain a very solid 10 percent above the year ago level and give a positive signal for underlying home sales.

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.