The MBA market index is down 7.7 percent in the February 10 week in reaction to a return to higher mortgage rates. It is down 3.5 percent from four weeks ago, and down 57.1 percent from a year earlier. Mortgage rates are up"across the board" for a second week in a row, the MBA said. MBA Deputy Chief Economist Kan said,"Mortgage rates increased across the board last week, pushed higher by market expectations that inflation will persist, thus requiring the Federal Reserve to keep monetary policy restrictive for a longer time."

The contract rate for a 30-year fixed rate mortgage is 6.39 percent in the February 10 week, up 21 basis points from the prior week, up 16 basis points from four weeks earlier, and up 234 basis points from a year earlier. While the increase may not choke off home buying activity this spring, it will reduce home affordability and will put pressure on sellers' prices.

The purchase index is down 5.5 percent from the prior week, down 9.6 percent from four weeks earlier, and down 35.6 percent from a year ago. The refinance index is down 12.5 percent week-over-week, up 9.6 percent from four weeks ago, and down 75.8 percent from the same time last year. Kan noted,"Potential buyers remain quite sensitive to the current level of mortgage rates." Kan also said,"Refinance borrowers, both rate/term and cash-out, remain on the sidelines as current rates provide little financial incentive to act."

The February 10 index for fixed rate mortgages is down 7.9 percent from one week ago, down 3.8 percent from four weeks earlier, and is 58.0 percent lower than a year ago. The index for adjustable rate mortgages is down 4.9 percent week-over-week, up 0.6 percent from four weeks ago, and down 40.3 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 their home purchase.

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.