Financing Homes in Lake Tahoe and Truckee since 1992.

Mortgage and Interest Rate Trends

Build It And They May Buy-Commentary ~ June 13, 2014

 The closest we have to Big News here is that there was an upward spike in the number of mortgages applied for in the week ending June 6. Is this exciting? It depends on how this is interpreted.

Rising demand for mortgages could, after all, signal that mortgage rates may finally edge higher. But, as is well known by now, whatever took the demand for mortgages-both purchase money and refinancings-higher could turn on a proverbial dime.

On the other hand, it is somewhat possible–though perhaps not worthy of betting actual money on–that the relatively good employment figures have for the past few months been suggesting that we’re edging toward a better economy, with more mortgage applications and greater real estate sales volume. We’ve had a medium-term improvement to the number of applications for unemployment insurance as well as a gradual rise to the number of pending home sales and perhaps even a growth in the number of new home sales that may be with us for a while.

That said, the curious thing about this possibility is how few analysts are talking about it. Very few market-watchers seem ready to go out on a limb these days, particularly with so many political problems vying for our attention.

At this moment, though, there is reason to be putting together one’s financial plan for the coming few months–and years. It is very likely a good time to keep in mind the against-the-grain analysis of Shaila Dewan in the International New York Times. She joined other analysts in asserting that “price growth appears to have peaked in several cities, particularly in the South and West, where large inventories of foreclosures have already been absorbed…. They predicted that in response, builders would step up the construction of new homes.”

This is what many market observers have been awaiting. The fact that we have a shortage of for-sale inventory–and a tremendous lack of new construction to build up that inventory–just hasn’t been addressed adequately with the completion of new inventory. It may indeed be worth waiting (as patiently as we still can) for the spikes in new construction to announce a resumption of the true real estate recovery…the one that addresses our underlying problems.

Perhaps the rising tide of new mortgages is a very early harbinger of a stronger housing recovery ahead.