The Mortgage Bankers Association announced today that the mortgage purchase application index remains steady but weak as it rose just 1.1% from last week to 267.3. 

It is the fifth consecutive week that the index has been below 270.

The 30-year fixed rate mortgage jumped from 5.17% to 5.36% for the week ending the July 31, 2009.

This data continues to reinforce two ongoing trends.  First, while demand for real estate appears to have bottomed from the lows we saw in January in the NAR existing home sales report, the current demand is being outpaced by the rate of homes going into foreclosure.  In other words, the supply of homes is going to outpace the demand for them, this means prices are going lower.

Second, despite mortgage rates rising from their lows that we saw in April and May, demand for real estate remains largely unaffected.  This inelastic relationship between demand and historically low mortgage rates points to a failed Fed monetary policy. 

While the Fed has committed $1.25 trillion into purchasing mortgage backed securities in an effort to plunge mortgage rates and stimulate demand for real estate, the only markets, with the exception Minnesota and Virginia, that are showing year over year increases in home sales are the markets where home prices have fallen most precipitously.  Unfortunately, massive home price declines are responsible for strong demand for real estate, not historically low mortgage rates.