Numbers Count: More price gains stir ‘bubble’ speculation

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Numbers count. They matter to bankers and to prospective homebuyers, sellers, and real estate professionals. Here’s my take on the key numbers on the housing market this week.

The numbers: Rates creep upward

Upward view of a tan townhouse under a palm tree, with a "sold" sign to the left.Average rates on 30-year, fixed-rate mortgages with conforming loan balances ($417,000 or less) rose last week to 4.07% from 4.04%, the Mortgage Bankers Association’s (MBA) Weekly Mortgage Applications Survey for the week ending May 22. The average interest rate for 5/1 adjustable rate mortgages (ARMs) increased to 3.04% from 2.99% the previous week.

What counts: Interest rates around 4% on 30-year, fixed rate mortgage loans are still low by historical standards, but they are creeping higher. Some prospective home buyers may not have noticed the movement, since many economists and housing experts have been repeatedly forecasting an increase in anticipation of the Federal Reserve raising interest rates, which hasn’t happened yet. But a month ago, average rates on 30-year, fixed-rate mortgages were 3.85%.

The latest weekly report on mortgage rates is a reminder that if you have been on the fence about buying a home or on the fence about applying for a mortgage, rates are not currently moving in your favor.

The numbers: Home-price index gains again

Home prices nationally were up 4.2% in March from a year ago, according to the S&P/Case-Shiller U.S. National Home Price Index released May 26. Case-Shiller’s 20-City Composite Index gained 5% year-over-year. The biggest increases were in San Francisco, up 10.3%, and Denver, up 10%.

What counts: The continued strong gains in housing prices have raised concerns of a housing bubble. I would agree with David M. Blitzer, managing director & chairman of the Index Committee for S&P Dow Jones Indices, who said, “Home prices are currently rising more quickly than either per capita personal income (3.1%) or wages (2.2%), narrowing the pool of future home-buyers. All of this suggests that some future moderation in home price gains is likely. Moreover, consumer debt levels seem to be manageable. I would describe this as a rebound in home prices, not a bubble and not a reason to be fearful.”

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