by Calculated Risk on 5/21/2008 05:36:00 PM

The Mortgage Bankers Association releases a Weekly Mortgage Application Survey. I used to follow the MBA index closely, because the index was a reasonable early indicator of house sales.

All that changed in early 2007 as the MBA index and house sales diverged. There were two reasons for this change: 1) many homebuyers were applying multiple times for loans (the MBA just counts applications), and 2) many lenders were going out of business - and most of these smaller lenders were not in the MBA sample. For more, see this post from May 2007: Is the MBA Index Currently Useless?

Click on graph for larger image.

This graph shows the MBA index since January 2002.

We still can't compare to earlier periods because of the changes in the industry. As an example, existing home sales were at the 6 million annual rate in Jan 2002 and the MBA purchase index averaged 356. Over the last 4 weeks, the MBA index has average 363, but existing home sales are below the 5 million annual rate.

And it's still too early to tell if the index is useful again. But perhaps we can start looking at the index for clues as to the direction of home sales again - and check back later to see if the index was correct. Right now the MBA index is suggesting sales will fall over the next couple of months. We will see.