The MBA mortgage applications index is 5.6 percent lower in the February 23 week. It is 15.3 percent lower than four weeks ago and 8.6 percent lower than a year earlier. The purchase index is 4.5 percent lower in the current week and 17.4 percent lower than four weeks ago and 11.9 percent lower than a year earlier. The refinancing index is 7.3 percent lower and is 11.2 percent lower than four weeks ago and 1.1 percent lower than a year earlier. In the February 23 week, refinancing accounted for 31.2 percent of mortgage applications compared to 32.6 percent in the prior week.

MBA Chief Economist Mike Fratantoni said,"Higher rates in recent weeks have stalled activity, and last week it dropped more for those seeking FHA and VA refinances. Purchase activity is running 12 percent behind last year's pace, but our January Builder Application Survey results showed that applications to buy new homes were up 19 percent compared to last year." He continued,"This disparity continues to highlight how the lack of existing inventory is the primary constraint to increases in purchase volume. However, mortgage rates above 7 percent sure don't help."

The fixed-rate mortgage index is 5.7 percent lower in the February 23 week. It is 16.1 percent lower than four weeks ago and 8.0 percent lower than this week last year. The adjustable-rate mortgage index is 4.1 percent lower and is 3.4 percent lower than four weeks ago and 14.9 percent lower than a year ago. Although applications for both fixed- and adjustable-rate mortgages are lower, homebuyers are considering adjustable rates as a more affordable option and probably hoping for an opportunity to refinance when rates come down.

The contract rate for a 30-year fixed-rate mortgage is 7.04 percent in the current week. This is 2 basis points lower than the prior week, 26 basis points higher than four weeks ago, and 33 basis points higher than a year earlier. The contract rate for a 5-year adjustable-rate mortgage is 6.33 percent in the week. This is 4 basis points lower than the prior week, 10 basis points higher than four weeks ago, and 60 basis points higher than a year earlier. In the February 23 week, adjustable-rate mortgages accounted for 7.5 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.