The MBA mortgage applications index is 7.4 percent higher in the December 8 week. It is 14.1 percent higher than four weeks ago and 7.7 percent lower than a year earlier. The purchase index is 3.5 percent higher in the current week and 12.3 percent higher than four weeks ago and 18.1 percent lower than a year earlier. The refinancing index is 19.4 percent higher and is 25.8 percent higher than four weeks ago and 27.2 percent higher than a year earlier. In the December 8 week, refinancing accounted for 39.2 percent of mortgage applications compared to 34.7 percent in the prior week.

The uptick in activity in the December 8 week can be attributed to falling mortgage rates. MBA Chief Economist Mike Fratantoni said,"Borrowers who had seen rates near 8 percent earlier this fall are now seeing some lenders quote rates below 7 percent. Refinance volume picked up in response to this drop in rates, with a particularly notable increase for FHA and VA refinance applications. Purchase volume was running about 18 percent below last year's pace, as prospective homebuyers are still challenged by a lack of inventory, even if rates have decreased."

The fixed-rate mortgage index is 8.6 percent higher in the December 8 week. It is 17.2 percent higher than four weeks ago and 6.3 percent lower than this week last year. The adjustable-rate mortgage index is 7.5 percent lower and is 18.1 percent lower than four weeks ago and 24.3 percent lower than a year ago. Homebuyers have a strong preference for fixed-rate mortgages to lock in monthly housing costs and avoid the risks associated with adjustable-rate mortgages.

The contract rate for a 30-year fixed-rate mortgage is 7.07 percent in the current week. This is 10 basis points lower than the prior week, 54 basis points lower than four weeks ago, and 65 basis points higher than a year earlier. The contract rate for a 5-year adjustable-rate mortgage is 6.47 percent in the week. This is 11 basis points lower than the prior week, 18 basis points lower than four weeks ago, and 89 basis points higher than a year earlier. In the December 8 week, adjustable-rate mortgages accounted for 6.3 percent of mortgage applications compared to 7.4 percent in the prior 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.