The MBA market index is up 5.3 percent in the April 7 week. It is up 7.0 percent from four weeks ago, and down 41.7 percent from a year earlier. Mortgage rates were down for the fifth week in a row, to their lowest level in two months. MBA Chief Economist Fratantoni said,"Prospective homebuyers this year have been quite sensitive to any drop in mortgage rates, and that played out last week with purchase applications increasing by 8 percent. Refinance application volume was a mixed bag with total volume essentially flat, conventional volume down for the week, but VA refinance volume increasing. The level of refinance activity remains almost 60 percent below last year, as most homeowners are currently locked in at much lower rates."

The contract rate for a 30-year fixed rate mortgage is 6.30 percent in the April 7 week, down 10 basis points from the prior week, down 41 basis points from four weeks earlier, and up 150 basis points from a year earlier.

The purchase index is up 7.8 percent from the prior week, up 8.5 percent from four weeks earlier, and down 31.4 percent from a year ago. The refinance index is up a small 0.1 percent week-over-week, up 4.1 percent from four weeks ago, and down 52.6 percent from the same time last year.

The April 7 index for fixed rate mortgages is up 6.6 percent from one week ago, up 9.9 percent from four weeks earlier, and is 40.8 percent lower than a year ago. The index for adjustable rate mortgages is down 10.9 percent week-over-week, down 23.8 percent from four weeks ago, and down 52.6 percent from a year ago. The decline in the use of ARMs suggests that homebuyers are finding fixed rates more affordable with the continued dip in rates, and encouraging some homebuying activity while rates are more favorable.

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.