by Calculated Risk on 8/20/2008 10:41:00 AM

The MBA Purchase Index wasn't useful during 2007 when so many lenders were going out of business. The primary reason was the MBA surveyed lenders that accounted for about half the volume of applications, and most of the failed lenders were not included in the survey. So, even though the housing market was in free fall, the surviving lenders actually saw an uptick in applications - distorting the Purchase Index.

At that same time many borrowers started filing multiple applications too, also distorting the survey results.

However it now appears the MBA Purchase Index might be useful again.

The MBA reports that the Purchase Index decreased slightly to 314 this week. The four week moving average (removes the weekly noise) declined to 314, and is now at the lowest level since 2002. Because of the changes to the index, we can't compare directly to 2002, but clearly the index is weak.

Click on graph for larger image in new window.

This graph shows the MBA Purchase Index and four week moving average.

Although we can't compare directly to earlier periods because of the changes in the index, this does suggest that sales of homes are continuing to decline.