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Can mortgage applications help predict home sales?

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  • John V. Duca

Abstract

In this article, John Duca finds that the Mortgage Bankers Association (MBA) index of home mortgage applications can help forecast home sales. Alone, the index is a good, albeit imperfect, predictor of total home sales. But when included along with housing affordability and real, after-tax mortgage rate data, the index does not add extra information if one disregards differences in data release lags. ; The index is available roughly three to four weeks ahead of the two alternative indicators. Taking into account its greater timeliness, it provides some extra information on home sales beyond that in the two other indicators considered. Given this qualification, the MBA index can help predict overall home sales. In addition, the long-run equilibrium relationships suggest that its usefulness may increase in the future. Nevertheless, the index should be used cautiously. It is still relatively new, and evidence suggests it may be misleading under some circumstances.

Suggested Citation

  • John V. Duca, 1996. "Can mortgage applications help predict home sales?," Economic and Financial Policy Review, Federal Reserve Bank of Dallas, issue Q IV, pages 21-30.
    • Handle: RePEc:fip:fedder:y:1996:i:qiv:p:21-30
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    References listed on IDEAS

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    6. Jeffrey C. Fuhrer & Eileen Mauskopf & Peter A. Tinsley, 1990. "The transmission channels of monetary policy: how have they changed?," Federal Reserve Bulletin, Board of Governors of the Federal Reserve System (U.S.), issue Dec, pages 985-1008.
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    Keywords

    Housing; Mortgages;

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