As expected, cooled inflation and subsequent lower interest rates lifted mortgage applications from their summer slump last week.

The Mortgage Bankers Association reported that loan application volume rose 11.9 percent last week from the previous week as rates neared their lowest level in almost a year.

The refinance index rose 17.5 percent to 1970.8, while the purchase index rose 7.6 percent to 404.6, according to The Mortgage Bankers Association.

While this data is reassuring, the increase in applications isn't a sure sign of a recovery. An increase in mortgage applications will definitely lead to more funded loans, but it's not an absolute science.

The quality of new applications needs to be considered. For instance, many applicants are simply attempting to refinance their mortgage after failing to sell their property for as long as a year. And many of these homeowners will find a series of hurdles in front of them as they try to close these deals with banks and lenders who frown upon their failure to sell on the open market.

New purchases are still very light, and many who do apply for a mortgage are under-qualified or simply lack the income to take on a mortgage payment in the current market.

With interest rates in the low six-percent rage on fixed products, and dipping into the fives on adjustable-rate products, there is definitely opportunity for a resurgence, but until housing prices come down to reasonable levels, we will continue to see a lull in the mortgage industry.

The current housing market is so overvalued that those looking to refinance will find their values coming in short, and those looking to purchase new homes will likely have trouble qualifying with prices still at all-time highs.

The simple fact of the matter is that many potential homeowners cannot afford a home at today's market prices. And until that is corrected, we will see fewer mortgage applications turn into fundings, regardless of increased volume.