Mortgage applications are stuck in limbo as inventory stifles any housing demand in the market since Americans don’t see the point in applying for a mortgage until conditions improve.

A recent housing report from Capital Economics posted that the 4.1% month over month rise in mortgage applications for home purchase in September does nothing to change the fact that mortgage demand has stalled since the start of the year.

For the second month in a row, the report states that total mortgage applications fell, although the drop was a small 0.5% month over month.

The Mortgage Bankers Association’s Weekly Mortgage Applications Survey released Wednesday morning only further confirmed this, citing a meager 2.9% rise in mortgage applications from one week earlier.

Then the headline for the previous week’s report echoes this stating “MBA: It’s another quiet week for mortgage applications.”

Capital Economics explained though that the month over month drop in mortgage applications hides a divergence between applications for home purchase – which rose by 4.1% m/m, reversing last month’s decline – and applications for refinance – which dropped by 3.2% m/m.

The small increase in mortgage applications for home purchase is welcome news, but it’s still not strong enough to offset that mortgage demand has stalled since the start of the year.

A new report from Goldman Sachs, however, is more positive on the situation.

To Goldman Sachs, despite flat housing starts and two quarters of declining residential investment, the housing recovery isn’t running out steam.

The report included several positive states on the economy including:           

• Soft residential investment in Q2 likely reflected payback from an unusually warm winter that pulled activity forward.
• Growth in private residential investment still stands at 5.7% year-over-year in Q2, substantially above potential GDP growth.

Most notably, the report stated that the National Association of Home Builders’ index rose to 65 in September, reaching its highest level of this recovery.

And, it stated that new single-family home sales have grown 21% over the last year and are almost back to 2007Q4 levels.

Between household balance sheets being healthy and the labor market continuing to make progress, Goldman Sachs says it believes the “fundamentals of the housing recovery remain solid.”