In recent months there have been many improvements seen across numerous aspects of the housing market, but some experts say that more lending from finance companies is helping to cover a shakier recovery.
Mortgage revenues for the PulteGroup, the nation’s second-largest home builder, grew 70 percent in the third quarter, at nearly six times the rate for revenues from actual home sales, according to a report from Bloomberg News. There was also a 60 percent mortgage revenue increase at Lennar Corp., the nation’s largest home builder, and that too was double the sales rate.
The reason for these massive increases in revenues despite lower sales numbers is that the Federal Reserve recently started a program that allows borrowing costs to be slashed across the entire industry, the report said. However, massive margins for lenders are likely an unintended consequence of the QE3 bond-buying efforts, because it hasn’t necessarily translated into lower borrowing costs for consumers quite yet. Instead, mortgage rates have more or less hovered in the same general area for several weeks.
“The Fed might have preferred that its interventions created less of a windfall for homebuilders and more for their buyers in the form of lower rates, but that’s something it can’t control,” Stephen Stanley, chief economist of Pierpont Securities in Stamford, Connecticut, told the news agency.
Through the end of October, the Standard and Poor’s Supercomposite Homebuilding Index has improved 83 percent this year, but it actually slipped 7.2 percent more recently because fewer new homes were actually sold in that month than were originally forecast, the report said. That might show that consumers have backed off buying homes in the final few months of the year, which could stall the recovery of the housing market in general.
It’s believed that major lenders will not be able to count on certain profit benchmarks in the future, however, because lawmakers have yet to define an aspect of the financial reform laws passed in 2010, the report said. Implementation of rules for qualified residential mortgages will get more affordable rates when that happens, but currently it’s difficult to guess what loans will fall into that category.
Experts say that housing affordability may remain high for some time, even as prices rise, thanks in large part to QE3’s expected ability to keep rats low at least through 2015.
Image: Diana Parkhouse, via Flickr