US: MBA Mortgage Applications

Wed Nov 22 06:00:00 CST 2017

Actual Previous
Composite Index - W/W Change 0.1% 3.1%
Purchase Index - W/W Change 5.0% 0.4%
Refinance Index - W/W Change -5.0% 6.0%

Purchase applications for home mortgages rose a seasonally adjusted 5 percent in the November 17 week, though overall mortgage activity was only barely higher (by 0.1 percent) than in the prior week as the increase in buyers was offset by a 5 percent decline in refinancing activity. On an unadjusted basis, the purchase index rose only 1 percent from the prior week, putting the year-on-year gain at 4 percent, down a sharp 14 percentage points from last week's reading due to an outsized weekly jump higher in the index in the comparable week last year. The slowdown in refinancing took its share of mortgage activity down 1.4 percentage points from the prior week to 49.9 percent. Mortgage rates rose slightly though remaining at historically low levels, with the average interest rate on 30-year fixed-rate mortgages ($424,100 or less) up 2 basis points to 4.20 percent. Today's report shows home-buyers quite active and adds to recent evidence of a housing market reviving in the fourth quarter, though the year-on-year gain, now at just 4 percent after much stronger readings for most of the year, suddenly looks much less impressive.

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.