US: MBA Mortgage Applications

Wed Nov 08 06:00:00 CST 2017

Actual Previous
Composite Index - W/W Change 0.0% -2.6%
Purchase Index - W/W Change 1.0% -1.0%
Refinance Index - W/W Change -1.0% -5.0%

Purchase applications for home mortgages rose a seasonally adjusted 1 percent in the November 3 week, the first increase in 3 weeks which put the unadjusted purchase index 9 percent above its level a year ago. But the slowdown in refinancing continued, with applications falling another 1 percent following the prior week's 5 percent drop, though the refinancing share of mortgage activity grew by 0.3 percentage points to 49.0 percent. Mortgage rates fell back after rising in the prior week to the highest level since July, with the average interest rate on conforming 30-year fixed-rate mortgages ($424,100 or less) down by 4 basis points to 4.18 percent. Despite some slackening in purchase application activity in recent weeks, the year-on-year gain remains at an impressive 9 percent, pointing to strength in 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.