The first of half of 2014 saw the lowest average level of mortgage applications in the United States since the second half of 2000. This has occurred in tandem with a 44 basis point drop in mortgage rates since the beginning of the year. The inverse relationship between mortgage applications and rates has actually been quite strong over the 25 years.
Refi's drove the mortgage application index higher from 2009 to mid 2013. This index has fallen by nearly 75% since the middle of 2013 when mortgage rates sharply rose. However, as we mentioned above, we haven't seen any rebound even though mortgage rates have been falling again.
Something seems to have structurally changed since 2009 for the purchase application index. The purchase index has been basically flat now for four years even as we have seen an increase in new home sales and existing home sales . From 1990-2008, the purchase application index had a -0.86 correlation to mortgage rates. However, since 2009, that correlation has actually flipped to a positive correlation of 0.51.