According to the MBA, after five consecutive weeks in which the mortgage purchase application index remained below 270, signaling weak demand for real estate, the index rose 3.9% this past week to 277.7.

The 30-year fixed rate mortgage fell from 5.38% to 5.15% for the week ending August 14th.

Mortgage purchase applications are an indicator of future demand for real estate.  Typically a potential buyer will apply for a mortgage, write a contract that goes "pending", and then eventually close on the property for a "sale". 

The reason why demand is a critical component of a housing recovery is because the number of foreclosure filings just hit a record in July and are up 32% year over year.  There needs to be a buyer for the foreclosed properties.

While the most recent mortgage purchase application index is a move in the right direction, demand has yet to rise in proportion to the number of foreclosures that will be coming to the market over the next several months.  This means home prices will be going lower.