How this all interacts...

I love charts.
Dealing in numbers all day long, charts to me are a refreshing way to look at numbers.
Sometimes charts speak for themselves, sometimes they need a little explaination.
Here's a chart of the last year.

You can see that all 4 of the lines tracked here, 30 yr fixed, 15 yr fixed, Fannie Mae, and the 1 Yr. ARM all have acted somewhat the same over the course of the year.
You can also see that since July we've been in a decreasing rate enviroment.

But also note that the mortgage applications have spiked sharply in that same time?
Coincidence?

The big question going forward is going to be just how rate sensitive we all are.
My post on 10/11 elluded to the idea that the bond markets got it all wrong (the hard landing of the housing bubble).

Now, perhaps it may be that we are in for a soft landing.
That may mean rates are going up in the near future.

As more homeowners loans go from a fixed rate period to the adjustable portion (as in a 3/1 ARM), they will need to refi and will have to do so at the rates currently offered. But what about the "elective" refinances.
Those that choose to refi - not those that have to refi.

And what about purchases?
Will rising rates keep borrowers from purchasing?
Fewer buyers means a slower housing market.

It's one side balancing the other.
That's what markets do.