The MBA mortgage applications index is up 0.9 percent in the July 7 week. It is down 0.2 percent from four weeks ago, and down 30.5 percent from a year earlier. MBA Deputy Chief Economist Joel Kan said,"Purchase applications increased, but remained at a very low level and are 26 percent lower than the same week last year. The rise in purchase activity was driven by increases in both FHA and VA purchase applications. The refinance index dropped to its lowest level since early June, as demand for rate/term and cash-out refinances remains extremely low with mortgage rates over 7 percent."

The purchase index is up 1.8 percent from the prior week, up 1.3 percent from four weeks earlier, and down 26.3 percent from a year ago. The refinance index is 1.3 percent lower week-over-week, down 4.2 percent from four weeks ago, and down 39.3 percent from the same time last year. Refinancing accounted for 26.8 percent of total applications in the week, down from 27.4 percent in the prior week.

The July 7 index for fixed rate mortgages is up 0.5 percent from one week ago, down 0.3 percent from four weeks earlier, and is 28.2 percent lower than a year ago. The index for adjustable rate mortgages is up 7.2 percent week-over-week, up 1.6 percent from four weeks ago, and down 52.3 percent from a year ago. Adjustable rate mortgages account for 6.6 percent of total applications in the July 7 week, up from 6.2 percent in the prior week. Higher mortgage rates are sending homebuyers to ARMs to make initial payments more affordable.

The contract rate for a 30-year fixed rate mortgage is up 22 basis points to 7.07 percent in the July 7 week, up 30 basis points from four weeks ago, and up 133 basis points from a year earlier. The rate for a 5-year adjustable rate mortgage is 6.24 percent, up 24 basis points from the prior week, up 34 basis points from four weeks earlier, and up 153 basis points from the year-ago week.

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.