Despite an increase in mortgage rates, mortgage applications increased 10 percent in the week ending January 4 according to a weekly survey by the MBA. The refinance index that is tracked by the MBA also rose significantly–12 percent following the prior week’s strong decline of 20 percent. Economists feel that data this volatile is an unsound basis to attempt to interpret underlying trends. A good deal of the utility in this index according to the MBA is the result of short holiday weeks and other special situations surrounding the holidays.
The Purchase Applications Index takes the pulse of the new mortgage market and the refi market. Investors watch this index is it not only is a gauge for single-family home demand but also overall economic momentum. Investors who watch this index believe folks must be feeling fairly comfortable and optimistic concerning their present and future financials if they buy a home.
Economists also have high regard for this MBA index. Each week the Mortgage Bankers Association (MBA) releases its weekly measure of purchase applications and mortgage lenders. This statistic is a leading indicator for single-family home sales as well as housing construction. New home construction equals more construction jobs, and paychecks that will be recirculated into the economy. When a new home is sold both the realtor and builder receive revenue and the buyer will have to choose any durable manufactured goods such as appliances and furniture. So, like a stone in a pond the ripple effect of the new home sale is multiplied by extraordinary fact. And if 100,000 households are created each month the ripple economic effect is increased by a factor of 100 thousand.
For the week ending January 4, 2013 the rate on a fixed 30 year mortgage increased nine basis points to an average of 3.61 percent this is the highest level since early November. Refinance application remained steady at 82 percent. Adjustable-rate mortgages remained unchanged at just three percent of total applications meanwhile, the HARP share fell slightly to 25 percent compared to 27 percent the prior week borrowers seeking jumbo loans also saw a slight increase from 3.7 percent the prior week to 3.78 percent the week ending January 4, points also increased to 0.38 percent from 0.30 percent for 80 percent loan to value mortgages.
The first week of the New Year saw a steep increase in mortgage activity despite new highs for mortgage rates. However, the report is indicating extreme swings from week to week making the data suspect and insufficient for meaningful analysis this week.