“I think the higher stock market and low rates is a function of the Fed [Federal Reserve] just pumping liquidity into the system,” said Paul Miller of FBR. “What you see, I believe, is some of that liquidity is leaking into the stock market, which is resulting in higher valuations for stocks. But the bond market is still flush with liquidity, and that is keeping mortgage rates low.”

Should the Fed start winding down its asset purchases later this year, mortgage rates will rise. That would make home buying more expensive in an already rising price environment. But is that enough to stop housing’s momentum? Perhaps not.

(Read More: What’s Really Behind Home Price Gains)

“For mortgage payments to return to their long-term average of 22 percent of disposable income, 30-year fixed rates would have to rise all the way to 9 percent,” noted Paul Diggle of Capital Economics. “Accordingly, we’re optimistic that the nascent improvement in mortgage applications will be sustained.”

In any case, it hasn’t been the rates holding borrowers back, but the availability of mortgage credit. That may be easing as well.

Nearly 10 percent of senior loan officers surveyed by the Federal Reserve in April reported easing their lending standards for low-risk mortgages. That’s an increase from the previous quarter. Banks were not, however, more willing to lend to borrowers with lower credit scores. This as 44 percent of loan officers surveyed reported demand for “prime” mortgages was moderately stronger.

(Read More: Old Ills Still Hit Big Banks)

Article source: http://www.cnbc.com/id/100720364

You probably don’t think of unrest in the far away Middle East as having anything to do with the housing market here in the U.S. You should.

The weekly mortgage applications say it all.

Despite the rate on the 30-year fixed falling below the psychologically important 5 percent line, mortgage applications to purchase a new home and to refinance both dropped; yes, there was a holiday involved, but the four week moving average is also down, despite mortgage rates coming off their Egypt-unrest surge.

Remember, rates track yields on the 10-year Treasury, which have been volatile due to the unrest abroad, but not THAT volatile: Less than half a percentage point.

Rates are one thing, but uncertainty weighs heavier on potential buyers, and rising oil prices may outweigh both.

“It’s the spring season. This is where new home buyers come out looking to buy a home,” says FBR’s Paul Miller. “If gas prices have gone up significantly, it’s going to cut into the foot traffic, and we’re really concerned with what that’s going to do to housing market.”

Page 1 of 2 | Next Page
Show Entire Article

Steve Jobs Takes Stage at Apple iPad 2 Launch

US Oil Surges Above $101 on Reports of Libya Airstrikes

Gaddafi Strikes at Town; Rebels Eye Foreign Help

US Housing Recovery Hurt by Unrest in the Middle East

Buffett on CNBC: Government Should Cut Back on Economic Stimulus

More Top Stories

Article source: http://www.cnbc.com/id/41868388?__source=RSS*blog*&par=RSS