Europe's Hardships Driving Mortgage Rates Down and Housing Numbers Up

While Europe's hardships continue, especially with Greece and Spain, U.S. mortgage rates are down and housing numbers are up. These global events inevitably make investors nervous about risky assets, thus leading them to invest in the safety of U.S. bonds which sends mortgage rates falling. On the positive side, consumers are reaping the benefits which is driving housing numbers higher.

As Europe remains in the midst of this very long financial crisis, mortgage rates here in the U.S. are historically low. The result is great for the housing market which, despite numbers, continues to be sluggish as compared to several years ago. Affordability has been the key element with respect to housing this year. Home prices are still down and mortgage rates keep falling making home affordability even more favorable. According to the National Association of Realtors, existing home sales rose 3.4% in April which is much higher than last year at this time. It is also reported that consumers are now outnumbering investors in home purchases. New Home Sales also increased in April 3.3% according to the Commerce Department and the Department of Housing and Urban Development with sales reported as being up in every area except the South. These numbers, although still low, are keeping those involved in these markets optimistic with the hope that they will continue. Nevertheless, there is still a lot of room for improvement since these small increases will not fuel the massive amount of jobs that were available during the housing boom.

According to the Mortgage Banker's Association's Weekly Mortgage Applications Survey, mortgage applications have been on the rise for the past three weeks. Increasing 5.6 percent for the week ending May 11th, 76.6% of these applications were for mortgage refinances. Consumers are taking advantage of all time low mortgage rates while hoping to put more money in their pockets. Of this number, HARP refinance applications remained the same at 28%. Although HARP is a very good program for underwater borrowers, many do not even know that it is available. While some are giving up after being turned down by their original lender, others are finding that there are indeed lenders out there ready to assist them. Hopefully, there will be more refining done to HARP so that borrowers across the board will be able to apply and receive a mortgage refinance. Having the ability to refinance may actually help decrease the delinquency rate since less homeowners will choose to strategically default if they are saving money and building equity in their homes once again.

While refinance applications have increased, the seasonally adjusted Purchase Index fell by 3.0 percent which was lower than a year ago. This may be a preliminary look at what to expect for the May existing and new home sales that will be released in June. FHA mortgage purchase applications and other government backed loans fell to 36.2 percent of all mortgage purchase applications which is most likely due to the increase in FHA upfront and annual mortgage insurance premiums that took effect in April. These increases in fees are hurting many potential borrowers and placing them out of the FHA purchase arena even though FHA mortgage rates remain low. Added to this, The Federal Home Finance Agency reported that the seasonally adjusted Home Price Index increased 0.6% during the first quarter of this year. With a large number of foreclosures not yet on the market, the supply of homes becomes smaller which results in higher prices. This increase may seem insignificant, but again, these small changes often prevent many consumers from being eligible for a home purchase.

While housing numbers are up for April, it does not necessarily mean that they will continue to be up in May since purchase application numbers are not showing substantial gains on a weekly basis for this month. Housing is an area that has to be watched closely since it is responsible for a great number of jobs that were lost several years ago when the housing market crashed. Without a significant housing recovery taking place, unemployment will continue to remain a major issue which will affect overall economic growth.

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