U.S. Weekly MBA Purchase Index Actual 165.1, Previous 159.6.

U.S. Weekly MBA Purchase Index Actual 165.1, Previous 159.6.

The U.S. Mortgage Bankers Association (MBA) Purchase Index surged to 165.1 in the latest report, marking a significant 3.4% increase from the previous week's 159.6. This robust reading underscores a resilient housing market, driven by falling mortgage rates and strong regional demand, particularly in the Midwest and South [1].

Falling mortgage rates have boosted affordability, with the 30-year fixed-rate mortgage dipping to 6.77% in July, its lowest level in three months [3]. This has encouraged buyers, particularly first-time homeowners, who have benefited from a 16% increase in FHA loan applications in June [1]. The regional demand shifts, with strong activity in the Midwest and South offsetting weakness in the Northeast, have further fueled the housing market's resilience.

The surge in the MBA Purchase Index presents clear sector rotation opportunities for investors. Consumer Finance sectors, including banks, lenders, and homebuilders, are expected to outperform. For instance, JPMorgan Chase (JPM) and Wells Fargo (WFC) are likely to benefit from rising origination volumes, while homebuilders like Lennar (LEN) and KB Home (KBH) are expected to gain from increased purchase activity [1].

Conversely, mortgage REITs may face pressure due to prepayment risks. A 5% increase in the MBA Index since 2020 has led to a 2–3% drop in REIT prices, as homeowners refinance to lock in lower rates [1]. Investors should avoid mortgage REITs until the index stabilizes below 160, reducing refinancing-driven volatility.

Construction and engineering stocks are also expected to outperform the S&P 500 by 18% on average when the MBA Index exceeds 240, driven by housing-driven equipment demand [1]. The SPDR S&P Homebuilders ETF (XHB) rose 12% during the last MBA surge to 170 in 2022, presenting a potential investment opportunity.

However, discretionary sectors may underperform as housing demand diverts consumer spending. A 10% MBA Index rise correlates with an 8% underperformance in the Consumer Discretionary Sector [1]. Investors should avoid general discretionary stocks like General Motors (GM) and Carnival (CCL) until housing demand cools, and consider hedging against sector declines using ProShares Short Consumer Discretionary (SCS).

The Federal Reserve's September 2025 meeting will be critical in determining the future trajectory of the housing market and sector rotations. A sustained MBA Index above 160 could signal the Fed's resolve to keep rates high to curb inflation, favoring Consumer Finance and construction stocks. Conversely, a dip below 155 might prompt easing, benefiting REITs via lower borrowing costs [1].

Investors should position their portfolios accordingly, overweighting Consumer Finance and construction-linked equities while hedging against discretionary sectors and mortgage REITs. Monitoring the August housing starts report and September Fed meeting will provide further insights into rate policy and sector rotations.

References:

[1] https://www.ainvest.com/news/mba-purchase-index-surges-165-3-capitalizing-housing-driven-sector-rotations-2507/
[2] https://www.tradingview.com/news/reuters.com,2025-07-23:newsml_S0N3TF00F:0-table-mortgage-bankers-assn-weekly-applications-survey/
[3] https://tradingeconomics.com/united-states/mortgage-rate