Low Mortgage Rates Today Probably Drove Existing Home Sales Higher

Recent record low mortgage rates probably helped drive existing home sales higher in April. Existing Home Sales, scheduled to be released by The National Association of Realtors (NAR) at 10:00 AM this morning, probably increased 2.9 percent to a 4.61 million annual rate last month, according to the median forecast of 73 economists surveyed by Bloomberg News. Current 30 year mortgage rates today are averaging 3.79 percent, a record low, fueling both home purchases and mortgage refinances.

Homes have been and continue to be more affordable then they have been in a generation. A sharp decline in home prices since the housing bubble popped and record low mortgage rates are the driving factors behind affordability.

The NAR's composite quarterly Housing Affordability Index rose to a record high of 205.9 in first quarter of 2012. The index is based on the relationship between median home price, median family income and average mortgage interest rates.

Homes are more affordable has the index rises. The NAR has kept records on housing affordability since 19070 and the 205.9 is the first time the quarterly index broke the 200 mark.

If existing homes sales come in stronger then expected that could drive current mortgage rates higher. Investors will take stronger home sales as an indicator that the economy is actually stronger than people believe. This will drive bond yields higher and as a result mortgage rates will also move higher.

Even if mortgage interest rates move higher I don't expect rates to increase by much. 30 year rates will stay under 4.00% for several more months and 15 year rates might possibly break under 3.00%.

Author: Jason P. Jones
May 22nd, 2012

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