Mortgage applicatios continue to drop as the housing market continues to contract. This is an early signal of more bad news to come since less mortgages means less buying, which means that demand is lower and housing prices will drop. Unfortunately, dropping housing prices mean declining home values and less home equity lines of credit, which means that consumer spending is due to slow even more. Meanwhile, there has been a rise in refinancing applications as many seek to lock in lower rates, save money monthly, and extend their original mortgages. This signals that more people are feeling the crunch and are finding themselves unable to meet their monthly payments. The cycle repeats.

From CBS MarketWatch:
Mortgage applications filed last week dropped a seasonally adjusted 22.6% from the previous week, as interest rates on fixed-rate mortgages increased, the Mortgage Bankers Association reported Wednesday. Applications in the week ended Feb. 15 were up 33.9% compared with the same week in 2007, the Washington-based MBA's latest survey showed.Applications for loans to refinance existing mortages were down 27.9% on a week-to-week basis, while applications  for mortgages to purchase homes were down a seasonally adjusted 11.5%, according to the survey. The four-week moving average for all loans was down 3.8%. According to the survey, refinancing applications accounted for 61.7% of all filings last week, down from 67.4% the previous week. Adjustable-rate mortgages made up 12.8% of all applications, higher than 9.9% in the previous week.