The MBA reported on Wednesday that the mortgage purchase application index rose 1% this past week to 280.5.

While the reading of 280.5 does not represent overly encouraging demand for real estate, the index has slowly risen for four consecutive weeks.

The 30-year fixed rate mortgage rose from 5.15% to 5.24% for the week ending August 21st.

Between the recent surges in existing and new home sales, as well as the past four weeks of mortgage purchase applications, it appears that demand has stabilized thanks to precipitous home value declines, an $8,000 first time home buyer tax credit, and a $1.25 trillion Fed funny money monetary policy.

Unfortunately, the context that is being lost is that while demand has rebounded back to pre-September of 2008 levels, foreclosures (supply) are escalating at a greater rate than demand is. 

According to RealtyTrac, foreclosure filings were up 32% year over year in July to a new record high while exisiting home sales were only up 5% during this same time frame.