MBA Purchase Index

AAA

DEFINITION of 'MBA Purchase Index'

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. Analysts consider the MBA Purchase Index to be a leading indicator of the housing market. 

INVESTOPEDIA EXPLAINS '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. Housing economists and homebuilders 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 leading 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. For example, a news report might read, “The MBA Purchase Index rose 2% for the week ending June 21.” The index changes seasonally since real estate activity is seasonal. 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 interest rates, home prices, 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. 

RELATED TERMS
  1. NAHB/Wells Fargo Housing Market ...

    An index based on a monthly survey of members belonging to the ...
  2. Affordability Index

    A measure of a population's ability to afford to purchase a particular ...
  3. House Price Index - HPI

    A broad measure of the movement of single-family house prices ...
  4. PHLX Housing Sector Index - HGX

    An index that tracks approximately 20 companies that work directly ...
  5. New Home Sales

    An economic indicator that measures sales of newly built homes. ...
  6. Mortgage Bankers Association - ...

    The national association that represents the real estate finance ...
Related Articles
  1. Credit & Loans

    How Mortgage Refinancing Affects Your Net Worth

    Find out how to determine whether refinancing will put you ahead or even more behind.
  2. Credit & Loans

    Mortgages: Fixed-Rate Versus Adjustable-Rate

    Both of these have advantages and disadvantages depending on your financial needs and prospects.
  3. Investing Basics

    Economic Indicators That Do-It-Yourself Investors Should Know

    Understanding these investing tools will put the market in your hands.
  4. Investing Basics

    Understanding The Case-Shiller Housing Index

    This index is a widely-used and respected barometer of the U.S. housing market and the broader economy.
  5. Active Trading

    Leading Economic Indicators Predict Market Trends

    Leading indicators help investors to predict and react to where the market is headed.
  6. Credit & Loans

    How Lender Overlays Prevent Mortgages

    Loan applications are increasingly being rejected because of lender overlays.
  7. Home & Auto

    When (And When Not) To Refinance Your Mortgage

    There are both good and bad reasons to refinance. Learn more about both here.
  8. Home & Auto

    Remodeling The Housing Finance Industry

    The meltdown in mortgage-backed securities is bringing about reform in home financing.
  9. Home & Auto

    Adjustable-Rate Mortgage Indexes: Know Your Benchmark

    Understanding these benchmarks can help you select the most competitive adjustable-rate loan.
  10. Retirement

    Economic Indicators To Know

    The economy has a large impact on the market. Learn how to interpret the most important reports.

You May Also Like

Hot Definitions
  1. Christmas Island Dollar

    The former currency of Christmas Island, an Australian island in the Indian Ocean that was discovered on December 25, 1643. ...
  2. Santa Claus Rally

    A surge in the price of stocks that often occurs in the week between Christmas and New Year's Day. There are numerous explanations ...
  3. Commodity

    1. A basic good used in commerce that is interchangeable with other commodities of the same type. Commodities are most often ...
  4. Deferred Revenue

    Advance payments or unearned revenue, recorded on the recipient's balance sheet as a liability, until the services have been ...
  5. Multinational Corporation - MNC

    A corporation that has its facilities and other assets in at least one country other than its home country. Such companies ...
  6. SWOT Analysis

    A tool that identifies the strengths, weaknesses, opportunities and threats of an organization. Specifically, SWOT is a basic, ...
Trading Center