uploads///MBA Purchase Index

Mortgage Purchase Applications Fell Last Week


Jun. 30 2016, Updated 4:54 a.m. ET

MBA Purchase Index fell slightly

Mortgage purchase applications fell 3% in the week ending June 24, 2016. We’re at the tail end of the seasonally strong period for house purchases. Homeowners generally want to move during the summer, before school starts. Inventory remains an issue. There are so few homes available for sale right now that it’s impacting mortgage applications.

In the above graph, you can see the spike in applications as buyers and originators tried to get in under the wire before the TILA-RESPA Integrated Disclosure rule took effect. Ever since rates bottomed out in 2013, the MBA (Mortgage Bankers Association) Purchase Index has fallen much less than the MBA Refinance Index.

The steadiness is mainly because homebuyers tend to be less sensitive to interest rates than those looking to refinance. The latter are driven 100% by interest rates. Even if rates increase, people still move, get married, and move out.

Article continues below advertisement

Implications for homebuilders

The spring selling season is in the later innings for homebuilders. For the most part, orders and backlog have increased. The next big event for builders such as Lennar (LEN) will be the return of the first-time homebuyer. D.R. Horton (DHI) is rolling out a new brand called “Horton Express” to target the first-time homebuyer.

These buyers might be waking up after a long slumber. Household formation numbers have risen in the last few months. While many first-time homebuyers will undoubtedly be renters, the news is encouraging for the sector.

The luxury end of the sector is represented by Toll Brothers (TOL), which is doing extremely well. However, it has exposure to hot urban markets. Toll Brothers performed well as a dollar play for foreign investors. PulteGroup (PHM) is joining D.R. Horton in targeting the first-time homebuyer.

A lack of skilled labor has been an issue for builders. This could be why we’re seeing housing starts creep up slowly. The fall in energy prices could draw many skilled construction workers from the energy patch back into home construction.

Investors can trade in the homebuilding sector through the SPDR S&P Homebuilders ETF (XHB).

In the final part of this series, we’ll look at mortgage refinance applications for last week.


More From Market Realist

  • A "now hiring" sign outside a Popeyes restaurant, one sign that employers are having trouble finding employees willing to work for current wages.
    Why Employers Are Struggling To Fill Jobs Despite High Unemployment
  • Beyond Meat patties in a grocery cart
    Buying the Dip on Beyond Meat (BYND) Stock Is a Risky Move
  • People looking at data on a laptop
    Is Driven Brands (DRVN) a Good Stock to Buy? A Look at the Year Ahead
  • A Moscow Mule drink made with Reed's
    Is Reed's (REED) a Good Stock to Buy? A Look at the Year Ahead
  • CONNECT with Market Realist
  • Link to Facebook
  • Link to Twitter
  • Link to Instagram
  • Link to Email Subscribe
Market Realist Logo
Do Not Sell My Personal Information

© Copyright 2021 Market Realist. Market Realist is a registered trademark. All Rights Reserved. People may receive compensation for some links to products and services on this website. Offers may be subject to change without notice.