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. Housing Starts

    The number of new residential construction projects that have ...
  6. Existing Home Sales

    An economic indicator of both the number and prices of existing ...
RELATED FAQS
  1. What's the most accurate way to find out a nation's nominal GDP?

    The data for gross domestic product, or GDP, is compiled by statistical governmental agencies in each country and is aggregated ... Read Full Answer >>
  2. What are some examples of ways that sensitivity analysis can be used?

    Sensitivity analysis is an analysis method that is used to identify how much variations in the input values for a given variable ... Read Full Answer >>
  3. Which has performed better historically, the stock market or real estate?

    For the majority of U.S. history – or at least as far back as reliable information goes – housing prices have increased only ... Read Full Answer >>
  4. What economic indicators are important to monitor when investing in the insurance ...

    Inflation and interest rates are the best economic indicators to monitor when investing in the insurance sector. Unlike with ... Read Full Answer >>
  5. How can I use the rule of 70 to estimate a country's GDP growth?

    You could use the rule of 70 to estimate a country's gross domestic product (GDP) growth by dividing 70 by the expected GDP ... Read Full Answer >>
  6. What are the early warning signs of a tech bubble?

    The book-to-bill ratio in the electronics sector refers to the ratio of orders received to the number of units shipped for ... Read Full Answer >>
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. Yield Curve

    A line that plots the interest rates, at a set point in time, of bonds having equal credit quality, but differing maturity ...
  2. Productivity

    An economic measure of output per unit of input. Inputs include labor and capital, while output is typically measured in ...
  3. Variance

    The spread between numbers in a data set, measuring Variance is calculated by taking the differences between each number ...
  4. Terminal Value - TV

    The value of a bond at maturity, or of an asset at a specified, future valuation date, taking into account factors such as ...
  5. Rule Of 70

    A way to estimate the number of years it takes for a certain variable to double. The rule of 70 states that in order to estimate ...
  6. Risk Premium

    The return in excess of the risk-free rate of return that an investment is expected to yield. An asset's risk premium is ...
Trading Center