Headline deceives: Purchase index up while lending is down

Calculated Risk asks if the MBA Index is currently useless.

The MBA Purchase Index measures the number of applications for a mortgage, not the number of mortgage made.  I did not know that.  The index is up, while sales are down.  See Berson's graph:

 

Borrowers turned down for a loan go to another lender, get turned down, go to another lender, etc.  As borrower rejections increase, purchase applications go up.

Calculated Risk notes that the Index gets its data from only half its lenders.  As more lenders go out of business, borrowers are going to the remaining lenders, thus increasing their volume.  The total business is down, but business with the lenders-left-standing is up. 

So the reason the index is up is because the housing market is so bad.  Mortgage rejections are up, and more lenders are out of business.  Another reason that we have to be skeptical of any headline numbers.  We have to always look beyond the headlines.  Always.

On that same note, please be vigilant about questioning everything you read, including anything I write.  Your dissent and criticism are always welcome.