Home Sales show Bernanke’s low rates gaining traction: Economy

Housing market may be turning

Underwriting Standards

Ten percent of banks reported easier underwriting standards, the most since 2007, according to the survey, released last week. Twenty-five percent reported tightening standards, the least since 2007.

Standards on prime residential mortgage loans and home- equity loans were about unchanged in the Fed’s April survey of senior loan officers after tightening earlier.

The survey also indicated demand was strengthening for prime mortgage loans. And banks that said they would increase their exposure to residential real estate assets over the coming year outnumbered those that said would shrink exposure.

Discover Financial Services, led by Chief Executive Officer David Nelms, has acquired businesses to expand beyond the firm’s core credit-card operations and began offering mortgages. The company started offering them last month after buying the assets of Home Loan Center Inc. for $55.9 million.

“Home loans is a product our customers have been asking Discover for,” Nelms said in a June 19 conference call.

Monthly Payments

Low rates are also encouraging homeowners to refinance their properties, cutting monthly payments and leaving households with more to spend on other goods. The average rate on a 30-year fixed loan was 3.66 percent last week, compared with 6.8 percent in July 2006, according to Freddie Mac.

Refinancing volume in the week ended June 15 hit the highest level in three years, Mortgage Bankers Association data show. Still, that was down 27 percent from January 2009, when rates on 30-year loans fell below 6 percent.

One impediment: mortgages that are more than the value of the home after housing prices declined 33 percent from April 2006 to April 2012 on a seasonally-adjusted basis.

“The big remaining problem for the housing market is access to credit,” said Millan Mulraine, senior U.S. strategist for TD Securities in New York. “Until we can unlock that Pandora’s Box, the full impact of the low interest rates won’t be felt.”

Mulraine sees signs that process could be beginning. Home prices in the S&P/Case-Shiller index of property values in 20 cities posted 0.7 percent gains in both April and March, the best two-month stretch since 2009.

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