The MBA mortgage applications index is 10.4 percent higher in the January 12 week. It is 9.9 percent higher than four weeks ago and 12.0 percent lower than a year earlier. The purchase index is 9.2 percent higher in the current week and 9.1 percent higher than four weeks ago and 19.3 percent lower than a year earlier. The refinancing index is 10.8 percent higher and is 7.7 percent higher than four weeks ago and 10.3 percent higher than a year earlier. In the January 12 week, refinancing accounted for 37.5 percent of mortgage applications compared to 38.3 percent in the prior week.

MBA Deputy Chief Economist Joel Kan said,"Compared to a holiday-adjusted week, both purchase and refinance applications were up, and the increases were heavily driven by the conventional market. Although purchase activity is lagging year-ago levels, refinance applications have improved from their recent low point and have been showing year-over-year gains, albeit at low levels. If rates continue to ease, MBA is cautiously optimistic that home purchases will pick up in the coming months."

The fixed-rate mortgage index is 9.9 percent higher in the January 12 week. It is 10.4 percent higher than four weeks ago and 11.3 percent lower than this week last year. The adjustable-rate mortgage index is 19.7 percent higher and is 2.1 percent higher than four weeks ago and 21.8 percent lower than a year ago. The increase in applications for ARMs suggests that some homebuyers are more concerned about reducing the size of their monthly payment, and perhaps positioning themselves to refinance to a fixed rate mortgage in the future if mortgage rates decline. However, fixed rate mortgages are the preferred choice by most homebuyers. In the January 12 week, adjustable-rate mortgages accounted for 5.9 percent of mortgage applications compared to 5.4 percent in the prior week.

The contract rate for a 30-year fixed-rate mortgage is 6.75 percent in the current week. This is 6 basis points lower than the prior week, 8 basis points lower than four weeks ago, and 52 basis points higher than a year earlier. The contract rate for a 5-year adjustable-rate mortgage is 6.14 percent in the week. This is 3 basis points lower than the prior week, 19 basis points lower than four weeks ago, and 83 basis points higher than a year earlier.

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.