What Is an MBA Purchase Index?

The MBA Purchase Index is The Mortgage Bankers Association's weekly measurement of nationwide home loan applications based on a sample of about 75% of U.S. mortgage activity.

Contrary to its name, the MBA Purchase Index does not measure the number of homes purchased or mortgage loans closed. Instead, it is simply a report of mortgage loan applications, so the actual number of loans and sal♓es that were finalized will vary from the MBA Purchase Index. However, analysts consider the MBA Purchase Index to be a leading indicator of the housing market ܫand can be especially helpful for real estate investors dealing in mortgage-backed securities.

Understanding the MBA Purchase Index

The MBA Purchase Index is a leading indicator of home sales by four to six weeks, meaning that it is a predictor of housing activity, though predictions may not prove accurate. Because 澳洲幸运5官方开奖结果体彩网:real estate sales t🌜end to be seasonal, the MB Purchase Index is also adjusted seasonally as well.

Housing economists and home builders use the index to forecast new and existing home sales. Lenders use it to gauge whether they are getting enough applications given overall application activity. The index is also considered a 𒐪leading indicator of mortgage prepayment, which is important for investors in mortgage-backed securities, including REITs. The MBA Purchase Index is reported as a percentage increase or decrease from the previous week.

Previous research has indicated that the MBA 🅷purchase index can be a useful, albeꦜit imperfect, measure on its own. Its utility is mostly derived in making near-term forecasts. In some instances, such as the winter of 1995–1996, the index was an inaccurate indicator of housing market activity. This was primarily due to a mix of severe weather conditions which led to homebuilders postponing construction activity and an unanticipated change in interest rates.

Example of the MBA Purchase Index

For example, a news report might announce that the MBA Purchase Index ro༒se 2% for the week ending June 21, which provides an inside look at the number of potential home sales that were recorded for that particular week. Spring and summer tends to be a popular time for real estate as most housing market activity occurs from spring through fall, with a peak in the summer.

The relationship between the activity levels shown by the index and expected activity levels for the time of year tells analysts about the strength or weakness of the housing market. The weekly reports on the MBA Purchase Index describe the factors that are influencing mortgage application activity, such as 澳洲幸运5官方开奖结果体彩网:interest rates, home pri𓃲ces, credit availability, and the number of all-cash homebuyers. Because all-cash buyers make up a significant component of housing market activity, the MBA Purchase Index is said to understate housing market activity, especially when you consider how wealthy real estate investors purchasing lux☂ury properties or those buying up low price point properties with cash could change the market.