MBA Purchase Index

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. 



comments powered by Disqus
Hot Definitions
  1. Mortgage Modification

    A permanent change in a homeowner's home loan terms that makes the monthly loan payments affordable.
  2. Leveraged Benefits

    The use – by a business owner or professional practitioner – of their company’s receivables or current income to secure a loan whose proceeds then indirectly fund a retirement plan.
  3. Direct Consolidation Loan

    A loan that combines two or more federal education loans into a single loan. A Direct Consolidation Loan allows the borrower to make a single monthly payment. The loan is facilitated by the U.S. Department of Education and does not require borrowers to pay an application fee.
  4. Through Fund

    A type of target-date retirement fund whose asset allocation includes higher risk and potentially higher return investments "through" the fund's target date and beyond.
  5. Last In, First Out - LIFO

    An asset-management and valuation method that assumes that assets produced or acquired last are the ones that are used, sold or disposed of first.
  6. Variable Universal Life Insurance - VUL

    A form of cash-value life insurance that offers both a death benefit and an investment feature. The premium amount for variable universal life insurance (VUL) is flexible and may be changed by the consumer as needed, though these changes can result in a change in the coverage amount.
Trading Center