by Calculated Risk on 5/27/2009 08:39:00 AM

Back in 2007, when many lenders were going out of business, the MBA Purchase Index was distorted by the changes in the mortgage industry.

The lenders in the MBA survey accounted for about half the volume of applications during the housing boom, and most of the failed lenders were not included in the survey. So even though the housing market was in free fall in 2007, 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.

But it might be worth watching the index again.

The MBA reports that the Purchase Index increased 1.0 percent to 256.6 this week. The four week moving average (removes the weekly noise) increased to 260.2, and is now at the level of the late '90s.

Note: the refinance index declined as mortgage rates increased, but the index is still very high.

Click on graph for larger image in new window.

This graph shows the MBA Purchase Index and four week moving average since 2002.

Although we can't compare directly to earlier periods because of the changes in the index, this shows no pick up in overall sales activity.