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Rates grate on housing

Friday, August 16, 2013 - 01:53

Aug. 16 - Housing starts rose, but disappointed, as higher rates impact builders even as more buyers move to cash. Bobbi Rebell reports.

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The housing markets rebound continued- housing starts were up almost 6 percent in July- but not at the pace that economists had hoped for. And while at first, fingers might point to higher mortgage rates turning off buyers. In fact, the slower momentum may be a simple case of lack of supply and high demand for the houses themselves. The higher rates are hurting builders' ability to get the loans they need to build new homes. IHS Global Insight's Patrick Newport: SOUNDBITE: PATRICK NEWPORT, U.S. ECONOMIST, IHS GLOBAL INSIGHT (ENGLISH) SAYING: "I think it may be the reason that we are seeing a slowdown in momentum. There is a category called construction and new development loans that are dropping. Loans across most categories are rising right now but that one category which is the loans that builders take out to build new homes is actually continues to drop." And in a surprising finding- about half of current home sales are all cash- no borrowing at all- according to Goldman Sachs. So the cost of borrowing is not hitting home- literally. That's because of who is and who isn't buying according to BNP Paribas U.S. economist Laura Rosner: SOUNDBITE: LAURA ROSNER, ECONOMIST, BNP PARIBAS (ENGLISH) SAYING: "We are seeing some people return, mostly investors but mortgage rates matter for some households and its possible that they are still on the sidelines and the fact that rates have risen may mean that they stay on the sidelines so we think you know with mortgages rates nearing 5 percent it's unclear what impact that will have on the housing recovery. That is a key risk to the outlook and we think it's one that will matter for policy and for the growth outlook. " And in fact, the Thomson Reuters University of Michigan sentiment survey showed consumers were less upbeat about housing- a sign they may hunt for a new home but hold back on locking in a deal.

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Rates grate on housing

Friday, August 16, 2013 - 01:53