The MBA mortgage applications index is down 3.1 percent in the August 4 week. It is down 6.7 percent from four weeks ago, and down 30.5 percent from a year earlier. MBA Deputy Chief Economist Joel Kan said,"Rates increased for all loan types in our survey, with the 30-year fixed mortgage rate increasing to 7.09 percent, the highest level since November 2022." He continued,"Additionally, the rate for FHA mortgages increased to 7.02 percent, the highest rate since 2002. Not surprisingly, mortgage applications continued to decline given these higher rates, with overall application counts falling for the third consecutive week, as both purchase and refinance activity declined. The purchase index fell for the fourth consecutive week, as homebuyers continue to struggle with low for-sale inventory and elevated mortgage rates."

The purchase index is down 2.7 percent from the prior week, down 9.3 percent from four weeks earlier, and down 27.9 percent from a year ago. The refinance index is 4.0 percent lower week-over-week, unchanged from four weeks ago, and down 37.2 percent from the same time last year. Refinancing accounted for 28.7 percent of total applications in the week compared to 28.9 percent in the prior week.

The August 4 index for fixed rate mortgages is down 3.5 percent from one week ago, down 7.0 percent from four weeks earlier, and is 30.1 percent lower than a year ago. The index for adjustable rate mortgages is up 2.6 percent week-over-week, down 1.6 percent from four weeks ago, and down 35.3 percent from a year ago. Adjustable rate mortgages account for 6.9 percent of total applications in the August 4 week, up from 6.5 percent in the prior week. While homebuyers generally prefer fixed rate mortgages, home prices remain elevated and access to mortgage credit tighter. For many buyers, an adjustable rate mortgage improves initial affordability and enables the purchase.

The contract rate for a 30-year fixed rate mortgage is 16 basis points higher to 7.09 percent in the August 4 week, up 2 basis points from four weeks ago, and up 162 basis points from a year earlier. It is the highest since November 2022. The rate for a 5-year adjustable rate mortgage is 6.36 percent, up 18 basis points from the prior week, up 12 basis points from four weeks earlier, and up 176 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.