Mortgage applications by those planning to buy a home or refinance an existing mortgage reflect sensitivity to interest rates but also the economic outlook and job security. Last week's surge in mortgage applications came as rates showed signs of leveling out. Lower rates in the current week saw a dip in applications after news on the economic front was less favorable and also may be due to already-satisfied demand. In any case, mortgage applications are on the rise compared to the same week last year, and both for purchases and refinances. Also compared to the same time last year, applications for adjustable rate mortgages are higher as consumers try to keep initial monthly payment slower and perhaps refinance to a lower fixed rate mortgage before the adjustable rate reset occurs.

The MBA mortgage applications index is 2.6 percent lower in the June 13 week. It is 4.0 percent higher than four weeks ago and 17.9 percent higher than a year earlier. The purchase index is 3.0 percent lower in the current week and 5.1 percent higher than four weeks ago and 13.6 percent higher than a year earlier. The refinancing index is 2.1 percent lower and is 1.5 percent higher than four weeks ago and 25.3 percent higher than a year earlier. In the June 13 week, refinancing accounted for 37.3 percent of mortgage applications compared to 36.7 percent in the prior week.

The fixed-rate mortgage index is 2.4 percent lower in the June 13 week. It is 4.0 percent higher than four weeks ago and 16.6 percent higher than this week last year. The adjustable-rate mortgage index is 4.9 percent lower and is 4.2 percent higher than four weeks ago and 38.6 percent higher than a year ago.

The contract rate for a 30-year fixed-rate mortgage is 6.84 percent in the current week. This is 9 basis points lower than the prior week, 8 basis points lower than four weeks ago, and 10 basis points lower than a year earlier. The contract rate for a 5-year adjustable-rate mortgage is 6.10 percent in the week. This is 12 basis points lower than the prior week, 6 basis points lower than four weeks ago, and 17 basis points lower than a year earlier. In the June 13 week, adjustable-rate mortgages accounted for 7.1 percent of mortgage applications compared to 7.2 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.