Rock-bottom interest rates make buying a dream home more than just a dream. The reason is simple math: The lower the mortgage rate, the cheaper the monthly payment, which boosts the chances of getting approved for a home loan and being able to buy a home.
That’s why the jump in rates has housing bulls on edge. Before mortgage rates rose a full percentage point due to fears the Federal Reserve would stop buying mortgage-backed bonds and U.S. Treasuries, the housing stats screamed “Buy now!”
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April home prices jumped 12% vs. a year ago, the S&P Case-Shiller home price index found. Signed contracts for pending sales in May rose to their highest level since late 2006. In June, the National Association of Home Builders’ housing index hit a post-recession high.
But recent data has been less robust. Last week, June housing starts fell 9.9%. Monday, the National Association of Realtors reported that existing home sales fell 1.2% in June.
That’s why today’s reading from the NAHB, Wednesday’s June new-home sales number, and earnings reports on Thursday from home builders Pulte and D.R. Horton, are so important, says Eric Wiegand, senior portfolio manager at U.S. Bank wealth management.
“Investors will be anxious to see the impact of rising mortgage rates” on home buyers, says Wiegand. But he thinks rates for a 30-year fixed, which the Mortgage Bankers Association says hit 4.68% last week, are still low enough to keep the recovery going.