Today the Mortgage Bankers Association issued its latest report, and it’s seems like the housing bubble did not pop yet. At this point the continuing real estate boom is not a bonus to the economy, but rather a handicap. The amount of new real estate being in development far exceeds what market can absorb.

This kind of development is huge waste of resources. There are already “ghost towns” in Florida and in D.C., where nobody lives and all condos are for sale. All this useless activity consumes huge amount of money and natural resources. Money are lend by China to purchase oil and metals all around the globe on very inflated prices. The home-builders, despite huge prices, make only very reasonable profits.

So MBA reported that mortgage applications rebounded. But the grater amount of people are not bearing the mortgage they pay.

A greater proportion of mortgage refinancers tapped their home equity for cash in the first three months of this year than in any other quarter in the past 15 years, according to an analysis released yesterday.

The proportion of those taking ARM’s and other creative options is over 28%. The difference between 30-year fixed and 1-year ARM is only 0.49%, despite that more and more people just can’t afford even this fraction of a percent to pay. I predict that the absolute majority of those people will eventually default and lose their home.

The fed’s job at this stage is to force those people who cannot afford new home but are nevertheless buying it to stay where they are now. Bankruptcy is worse than staying in old home. This job is not done yet – keep working uncle Ben!