The Mortgage Bankers Association released their weekly mortgage purchase application which showed that despite the average 30-year fixed rate mortgage plunging from 4.89% to 4.63% (the lowest on record for the survey since 1990), the seasonally adjusted purchase application index only increased 4.2% from 257.1 to 267.8.
To give this 267.8 seasonally adjusted purchase index some context, during the week of November 26th of 2008 when the average 30-year fixed rate mortgage was 5.99%, the purchase index was 261.6. In other words, despite the 30-year rate being nearly 1.4 points lower today than it was the last week of November of 2008, there is virtually no change in demand for purchase mortgages. And while there has been an enormous surge in refinancing activity, the Fed's efforts and the nearly $1.25 trillion they have spent on driving down mortgage rates has had no meaningful impact on demand for real estate, which is what need in order to stop home value declines and downward pressure on banks balance sheets.
As I wrote about in one of my first blog posts in October of 2008, "fixing" the housing market is not about monetary policy or mortgage rates, it's about fiscal policy. In other words, providing tax incentives for Americans to invest in real estate, not just first time home buyers which have not responded to the $8,000 tax credit.