The MBA mortgage applications index is up 2.3 percent in the August 25 week. It is down 5.8 percent from four weeks ago, and down 27.3 percent from a year earlier. MBA Deputy Chief Economist Joel Kan said,"Mortgage applications for home purchases and refinances increased for the first time in five weeks but remained at low levels. Purchase applications increased but were still 27 percent lower than a year ago, as elevated mortgage rates and tight housing inventory continue to weigh on home buying activity."

The purchase index is up 2.0 percent from the prior week, down 6.0 percent from four weeks earlier, and down 27.2 percent from a year ago. The refinance index is 2.5 percent higher week-over-week, down 6.1 percent from four weeks ago, and down 27.6 percent from the same time last year. Refinancing accounted for 29.5 percent of total applications in the week compared to 28.6 percent in the prior week.

The August 25 index for fixed rate mortgages is up 2.4 percent from one week ago, down 6.8 percent from four weeks earlier, and is 26.5 percent lower than a year ago. The index for adjustable-rate mortgages is up 1.1 percent week-over-week, up 8.2 percent from four weeks ago, and down 36.1 percent from a year ago. Adjustable-rate mortgages account for 7.5 percent of total applications in the August 25 week, slightly lower than 7.6 percent in the prior week. Homebuyers may be deciding that a fixed rate mortgage above 7 percent is the best that can be had in the near term with anticipation of another rate hike by the FOMC expected in the next month or two. Nonetheless, demand for adjustable-rate mortgages has not gone away since it can reduce the initial monthly payment for a time and can be refinanced later if rates are more favorable before the reset.

The contract rate for a 30-year fixed rate mortgage is unchanged at 7.31 percent in the August 25 week, up 38 basis points from four weeks ago, and up 151 basis points from a year earlier. As noted above, it is the highest since December 2000. The rate for a 5-year adjustable-rate mortgage is 6.48 percent, down 2 basis points from the prior week, up 30 basis points from four weeks earlier, and up 170 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.