An Investor’s Guide to Housing Reports

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tdp2664 InvestorPlace Early Wednesday morning, the Mortgage Bankers Association reported that its closely watched mortgage applications index dropped 4.1% in the final week of December 2011, and that purchase applications were down 9.7% from the previously reported period of Dec. 16. It also noted that over 81% of the applications were for refinances, rather than purchases. But even though this number is closely watched, does it really matter? Will all those mortgage applications actually turn into purchased homes, or will many of them eventually be rejected by today's tighter lending standards? Or to put the question another way, given the wide variety and nearly constant flow of reports that cover one aspect or another of the housing and real estate markets, which one(s) matter most? On any given week, a good deal of real estate data is reported on the financial news wires, yet too often the reports seem to contradict each other — or paint a picture that's inconsistent at best. For example, many people don't realize that the MBA's report includes both new purchase applications and refinances. So when the application numbers rise, it may seem as if a slew of new home purchases are on the horizon. Yet, much of that activity may simply be homeowners refinancing their existing homes. The result: confused investors who are searching for ways to profit from general trends through real estate-related stocks. So how do we as investors sort out what's really going on when closed sales are up, but prices decline, or when pending sales are up, but new building permits or housing starts are down? Which other reports are the MOST important for us to consider, and which ones mean little? Let's take a look at the various reports. By scoring each with a grade, say, from A to C, we can identify which ones are the most worthwhile for investors to follow.