Wednesday, May 13, 2009

MBA Purchase Applications

Not really good news.
Released on 5/13/2009 7:00:00 AM For wk5/8, 2009
Previous Actual
Purchase Index - Level 264.3 265.7


Highlights
MBA's purchase index is improving but not much at 265.7 in the May 8 week vs. 264.3 in the prior week. These results, along with levels in April, are not pointing to a major pickup in home sales, suggesting that low interest rates and falling home prices are, as yet, giving only a limited boost to home sales. Low interest rates have had a big impact on refinancing, though demand has been slowing in recent weeks with the index down 11.2 percent to 4,588.6. Mortgage rates are at rock bottom with 30-year fixed loans averaging 4.76 percent for a 3 basis point decline.

Definition
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.

Why we care about this:
Why Investor's Care
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 carries valuable clues for the stocks of home builders, mortgage lenders and home furnishings companies.

Frequency
Weekly

Revisions
Weekly, data for previous week are revised to reflect more complete information.

Definition
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.

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