by Calculated Risk on 11/25/2009 12:38:00 PM

I skipped the MBA market index earlier ...

The MBA reports: Mortgage Applications Decrease in Latest MBA Weekly Survey

The Market Composite Index, a measure of mortgage loan application volume, decreased 4.5 percent on a seasonally adjusted basis from one week earlier. ...

The Refinance Index decreased 9.5 percent from the previous week and the seasonally adjusted Purchase Index increased 9.6 percent from one week earlier.
...
The average contract interest rate for 30-year fixed-rate mortgages decreased to 4.82 percent from 4.83 percent, with points increasing to 1.19 from 1.18 (including the origination fee) for 80 percent loan-to-value (LTV) ratio loans.

Note: This is the lowest contract interest rate since mid-May.

Click on graph for larger image in new window.

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

In the past, the MBA index was predictive of future sales, but it has been questionable for some time. The increase in 2007 was due to the method used to construct the index: a combination of lender failures, and borrowers filing multiple applications pushed up the index in 2007 even though activity was actually declining.

Recently there has been a substantial number of cash buyers, so the MBA index missed the strength of the recent existing home sales increase. Still the recent plunge in the 4 week moving average of the purchase index is probably worth watching.