According to the Mortgage Bankers Association, the weekly mortgage purchase application index fell -4.5% to 267.7 as mortgage rates eased from 5.44% to 5.34%.

The weekly purchase application had hit a 10-week high last week when it rose to 280.3.

And while the index did slip this past week, what we continue to see is that mortgage purchase applications, much like the actual demand for real estate, has been largely unaffected by sub 5% mortgage rates.

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% 

This data illustrates 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, it has not positively impacted demand for real estate.  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.