For the second week in a row, 30 year fixed mortgage rates dropped to 4.87 percent.

Last week a 30 year fixed rate was 4.94 percent and dropped 4.87 percent this week. For a 15 year mortgage the rate is at 4.33 percent.

Last week mortgage applications increased due to the drop in mortgage rates. The mortgage Bankers Association index of applications increased 16 percent.

"We're not expecting the housing market to come roaring back to anything close to what it was during the boom," said Scott Brown, chief economist at Raymond James & Associates Inc. in St. Petersburg, Florida. "It's going to be a long, gradual recovery."

Last year the Federal Reserve encouraged low mortgage rates by pledging to buy bond backed by home loans. The program increased to $1.25 trillion in March.