In the latest sign that the housing market is indifferent to sub 5% mortgage rates, according to the Mortgage Bankers Association, the mortgage purchase application index jumped 7.3% to 280.3, the highest reading in over 10 weeks.  This was despite the fact the average 30-year fixed rate mortgage was 5.44% for the week ending June 19th.

Here is a comparison between NAR's seasonally adjusted existing home sales and Freddie Mac's 30-year fixed rate mortgage survey over the past several months, this data reveals that record low mortgage rates have had no meaningful impact on demand.  You can call it the law of diminishing returns, price inelasticity, beating a dead horse, whatever, this is a concept that I have wrote about on more than one occasion.

Sep 2008:  5.10 million sales / 6.04%

Oct 2008:  4.94 million sales / 6.20%

Nov 2008:  4.54 million sales / 6.09%

Dec 2008:  4.74 million sales / 5.29%

Jan 2009:  4.49 million sales / 5.05%

Feb 2009:  4.71 million sales / 5.13%

Mar 2009:  4.55 million sales / 5.00%

Apr 2009:  4.66 million sales / 4.81%

May 2009: 4.77 million sales / 4.86% 

So what does this mean?  It means that the Fed blew $1.25 trillion in an experiment that was designed to stimulate the housing market and all they have to show for it is a short lived refinance boom.  Unfortunately, the unintended consequences is that as result of printing this money, rates will have to move much higher and that will negatively impact the housing market in 2010 and beyond.  This is yet another reason why we are only in the eye of the storm for this housing depression.