Policy makers generally have an easier time slowing an overheating economy than trying to stimulate a contracting one. The current state of the housing market bears that out.
Although mortgage rates are at multidecade lows, borrowing activity is falling, not rising. On Wednesday, the Mortgage Bankers Association will release its indexes of purchase and refinancing activity for the week ended June 25.
The report is notoriously volatile, but its trend over the past few months is clear. Purchase applications have tumbled by 39% since late April.
Meanwhile, average borrowing rates for a 30-year, fixed-rate mortgage have dropped to about 4.75% from just over 5%
Of course, the drop in applications partly reflects the expiration in April of the government's home-buyer tax credit. Still, similar weakness in the pace of refis also suggests that falling rates may be losing their punch.
When average, 30-year mortgage rates slipped below 5% in June 2003, MBA's refi index jumped to an all-time high of nearly 10,000.
In the years since, each dip below that key rate had a lesser impact. The latest move below 5% in May didn't spur the refi index any higher than about 3,500.
"We probably need to move squarely to 4.5% now to start generating more interest from borrowers," says Credit Suisse economist Jonathan Basile.
One problem is that many mortgage holders have refinanced in the past year or two, so rates have to fall still further to justify the costs tied to a new loan.
This is especially an issue since many lenders are raising fees, Mr. Basile notes, to offset losses elsewhere.
Tighter lending standards are another roadblock at a time when many households remain cash-strapped. Only 1.9% of consumers surveyed by the Conference Board plan to buy a home in the next six months, one of the lowest readings since 1982.
The bigger worry may be that a deflationary mindset has taken hold in the housing market. This has buyers in no hurry to lock in even today's low rates.
It is precisely this thinking that the Federal Reserve is trying to keep from taking hold in the broader economy. Housing shows, though, that even with super-low rates, the Fed can find itself pushing on a string.