MADELEINE BRAND, host:
Back now with DAY TO DAY. I'm Madeleine Brand.
Signs today that the soaring housing market may be leveling off. A survey of lenders finds rising mortgage rates are making it less attractive for homeowners to refinance. And some analysts are suggesting the higher rates could start driving off potential home buyers. "Marketplace" New York bureau chief Bob Moon joins us now.
And, Bob, is this finally the sign that the housing bubble we've been hearing so much about is starting to burst?
BOB MOON reporting:
Hi, Madeleine. Well, there's still some debate inside and outside the industry about whether there really is such a thing as a housing bubble. But at the very least, there are growing indications that the hot housing market might be starting to cool of. The latest sign comes from the Mortgage Bankers Association, which surveys lenders. And mortgage applications were down almost 1 percent last week to their lowest point since the end of May, and refinancing applications dropped more than 3 percent. Now those declines come as the survey finds rates are going up. The average rate for a 30-year fixed mortgage is higher than it's been since April. Perhaps more importantly, there may be a trend developing here. Mortgage rates have gone up in five of the last six weeks.
BRAND: So what does that tell us about where the general housing market may be headed?
MOON: Well, it's low mortgage rates that have really kept the housing market rolling for more than four years now. And this is a sign that those rates might be starting to head back up. A report just yesterday from the National Association of Realtors concluded that the housing market--and I'll put quotes around this here--"the housing market is probably close to a peak right now in terms of sales activity."
This gets a little complicated because the Realtors group also points out that there's still a tremendous amount of momentum in the marketplace. And it's forecasting sales of existing homes will increase 2.9 percent this year to a record 6.98 million. You have to look at it this this way, though. It's the rate of increase that's beginning to slow down, and sales should start to ease off these record levels in the second half of the year.
Looking ahead to next year, the Realtors group sees a much different picture. It says sales of previously owned homes will fall 3.6 percent and sales of new homes will drop 4.5 percent.
BRAND: And, Bob, you and I talked yesterday about the Federal Reserve raising interest rates. Will that affect the price of home loans?
MOON: Well, you'd think that would be the result, but this is what Fed Chairman Greenspan has called a conundrum because it almost hasn't mattered that the Fed has raised its target for short-term rates; yesterday was the 10th time since June of last year. Despite that, long-term interest rates have stayed relatively low. So there's really no way of saying whether this latest increase will start having an effect.
Today in the "Marketplace" newsroom, we're digging into Supreme Court nominee John Roberts' past decisions to see how he might rule on business cases.
BRAND: Bob Moon of public radio's daily business show "Marketplace." And "Marketplace" is produced by American Public Media. Thanks a lot, Bob.
MOON: Thanks, Madeleine.
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