Bounce in mortgage applications over?

Interesting data out of the Mortgage Bankers Association this morning: Applications for mortgages to buy homes dropped 8.4% after falling 7% the week before, as shown in this chart from Bloomberg. The purchase application index has been extremely volatile lately, with wild swings both up and down. That stems from seasonal adjustment problems related to the Christmas and New Year's holidays.

But after smoothing out that volatility, I think one thing is clear: The recent rise in interest rates, which bottomed out in early December, appears to be causing the late fall/early winter rally in housing market activity to stall out. Home sellers could be in for a shock if rates continue to climb into the start of the spring real estate season.