The MBA market index is down 9.0 percent in the January 27 week from the prior week. It is up 26.0 percent from four weeks ago, and down 62.4 percent from a year earlier. The MBA noted that the decline in the current week's data despite the declines in mortgage rates reflects the volatility in the housing market at this time of year. MBA Deputy Chief Economist Kan said expectations are for further downward pressure on mortgage rates that should help lift sales in the spring homebuying season.

The contract rate for a 30-year fixed rate mortgage is 6.19 percent in the January 27 week, down 1 basis point from the prior week, down 39 basis points from four weeks earlier, and up 241 basis points from a year earlier. Lower mortgage rates mean better home affordability. Potential homebuyers who can qualify for a mortgage may decide the time is right to enter the housing market.

The purchase index is down 10.3 percent from the prior week, up 15.0 percent from four weeks earlier, and down 41.0 percent from a year ago. The refinance index is down 7.1 percent week-over-week, up 50.1 percent from four weeks ago, and down 80.2 percent from the same time last year. People who plan to buy a home in the coming months may be locking in a lower rate while they shop. As has been the case in recent weeks current mortgage holders who borrowed at the peak in the fall months of 2022 may be taking the opportunity to refinance from an adjustable rate to a fixed rate, or to otherwise reduce monthly housing costs. But some of that demand has been exhausted.

The January 27 index for fixed rate mortgages is down 9.1 percent from one week ago, up 26.9 percent from four weeks earlier, and is 63.2 percent lower than a year ago. The index for adjustable rate mortgages is down 6.0 percent week-over-week, up 15.4 percent from four weeks ago, and down 44.3 percent from a year ago. Homebuyers are opting for fixed rate mortgages where possible, but willing to take out an adjustable rate if that secures the right home purchase. Some buyers may be willing to purchase using an ARM loan in anticipation of a chance to refinance at an affordable fixed rate later.

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.