
In reality, the number of mortgage applications has been shrinking, both in real terms and in terms of year-over-year change:
But the shrinking number of mortgage applications hasn't stopped investors from partying like it's 2005:
The new housing bubble will either continue to expand and eventually burst a la 2008, or it will decompress like a whoopee cushion if the Fed "tapers off" the liquidity pumping too quickly. The market wouldn't be destined for one of these less-than-ideal outcomes if the "recovery" were based upon consumer demand instead of money created out of thin air and artificially-low interest rates.