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Analysis for the Housing Market
By:Ken Lee

In the week ending January 29th, the MBA’s seasonally-adjusted purchase index increased 10.3% from the previous week but was still down 9.03% compared to the same time last year to a reading of 237.8.

The Market Composite Index, which is a measure of mortgage loan application volume, jumped 21% on a seasonally-adjusted basis from the previous week. A sharp increase in refinance activity along with a jump in purchase activity pushed overall mortgage application activity higher over the past week.

The refinance share of mortgage activity increased to 69.2% in the week ending January 29th compared to 67.6% in the previous week.

Definitions and Importance for the Housing Market
By:Ken Lee

A purchase mortgage application occurs when a potential purchaser (buyer) submits an application to qualify for a mortgage. Purchase mortgages are tracked separately from refinance mortgages (the issuance of new debt to replace old debt). 

Information for mortgage applications is obtained from a survey conducted by the Mortgage Bankers Association, which covers approximately 40 percent of all U.S. retail residential mortgage originations. The survey has been conducted weekly since 1990 and is considered to be highly reliable due to the significant survey sample size. Respondents include mortgage bankers, commercial banks and thrifts. The Mortgage Bankers Association (MBA) uses an index to measure, in constant terms, any fluctuations in the number of mortgage applications issued during a given period. The base period for all indexes is March 16, 1990=100. 

Because a mortgage application occurs very early in the home buying cycle, this indicator is a very good predictor of short-term sales. Because it is a weekly survey, and there is little lag time, this indicator is very useful for businesses in the home buying industry. It is important, however, not to overreact to one bad week.