The MBA market index is down 13.3 percent in the February 17 week as higher mortgage rates reduce home affordability and push some buyers out of the market. It is down 21.7 percent from four weeks ago, and down 57.2 percent from a year earlier. Mortgage rates are up for a third week in a row. MBA Deputy Chief Economist Kan said,"This time of the year is typically when purchase activity ramps up, but over the past two weeks, rates have increased significantly as financial markets digest data on inflation cooling at a slower pace than expected. The increase in mortgages rates has put many homebuyers back on the sidelines once again, especially first-time homebuyers who are most sensitive to affordability challenges and the impact of higher rates."

The contract rate for a 30-year fixed rate mortgage is 6.62 percent in the February 17 week, up 23 basis points from the prior week, up 42 basis points from four weeks earlier, and up 256 basis points from a year earlier.

The purchase index is down 18.1 percent from the prior week, down 28.4 percent from four weeks earlier, and down 41.3 percent from a year ago. The refinance index is down 2.2 percent week-over-week, down 6.5 percent from four weeks ago, and down 72.0 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 applications declined last week and remained more than 70 percent behind last year's pace. Given that rates are over 2.5 percentage points higher than a year ago, we expect that refinance activity will remain depressed for some time."

The February 17 index for fixed rate mortgages is down 13.9 percent from one week ago, down 22.7 percent from four weeks earlier, and is 58.3 percent lower than a year ago. The index for adjustable rate mortgages is down 4.4 percent week-over-week, down 8.0 percent from four weeks ago, and down 36.2 percent from a year ago. Homebuyers are once again looking at adjustable rate mortgages as a way to improve the initial affordability of a home loan.

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.