The MBA mortgage applications index is 0.5 percent higher in the May 10 week. It is 2.0 percent lower than four weeks ago and 7.8 percent lower than a year earlier. The purchase index is 1.7 percent lower in the current week and 2.7 percent lower than four weeks ago and 14.3 percent lower than a year earlier. The refinancing index is 4.7 percent higher and is 0.2 percent lower than four weeks ago and 6.8 percent higher than a year earlier. In the May 10 week, refinancing accounted for 32.0 percent of mortgage applications compared to 30.6 percent in the prior week. Two weeks of declines in mortgage rates have yet to bring homebuyers into the market, though it helps some refinancers. It also means that fixed rate mortgages are preferred by those who are seeking a new mortgage or refinancing an existing one either to take out some equity or secure a lower rate and/or lock in monthly housing costs.

The fixed-rate mortgage index is 1.3 percent higher in the May 10 week. It is 1.6 percent lower than four weeks ago and 8.2 percent lower than this week last year. The adjustable-rate mortgage index is 8.9 percent lower and is 6.4 percent lower than four weeks ago and 1.9 percent lower than a year ago.

MBA Deputy Chief Economist Joel Kan said,"The decline in rates led to a small boost to refinance applications, including another strong week for VA refinances. However, the overall level of refinance activity remains low. Purchase applications decreased, driven largely by a 9 percent drop in FHA purchase applications. Conventional home purchase applications were down around one percent." He noted,"While the downward move in rates benefits prospective homebuyers, mortgage rates are still much higher than they were a year ago, while for-sale inventory remains tight."

The contract rate for a 30-year fixed-rate mortgage is 7.08 percent in the current week. This is 10 basis points lower than the prior week, 5 basis points lower than four weeks ago, and 51 basis points higher than a year earlier. The contract rate for a 5-year adjustable-rate mortgage is 6.56 percent in the week. This is 4 basis points lower than the prior week, 4 basis points higher than four weeks ago, and 85 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.