CHICAGO, IL--(Marketwired - Oct 8, 2014) -
- Historically low mortgage rates are still helping the housing market
- Key factors putting recent strain on home sales easing or disappearing
- Active home buying season expected to continue this fall
BMO Economics is forecasting consistent growth in the U.S. housing market, according to a recent report from BMO Head of U.S Economics Michael Gregory.
"With the easing of mortgage rates, the passing of the polar vortex, and the ebbing of uncertainty over new lending rules and regulations, indicators are pointing toward a more sustained rebound in home sales during the months ahead," said Mr. Gregory.
After mortgage applications reached a multi-year high for purchases in May 2013, they began to move downward as mortgage rates spiked up following bond market fluctuations in the spring and summer of 2013.
In addition to higher mortgage rates, the extreme winter weather of 2013 - 2014 -- brought on by the polar vortex -- contributed to slow home sales. The first month of 2014 was the coldest January on-record, followed by the second-coldest February and the coldest March. The latter month is when home sales hit their recent lows.
However, by spring and summer of 2014, mortgage rates had drifted down a bit and the effects of the record-setting winter were waning, the report notes. The current 4.19 per cent reading on the 30-year mortgage rate is still below 95 per cent of all 30 year mortgage rates in the 43-year history of Freddie Mac's weekly survey.
"Coming out of the harsh winter and late start to home buying season, we had a noticeably active spring while sales continued to pick up during the summer," said Kevin Christopher, Head Mortgage Sales, BMO Harris Bank. "We see optimism continuing into the fall, with more pre-approvals coming in than during this time last year."
"The spring-summer rebound would have probably taken housing activity even higher, if not for the Ability-to-Repay Rule and the Qualified Mortgage Rule taking effect in early January, which created some regulatory uncertainty," noted Mr. Gregory.
As a result, credit contracted in the second quarter of 2014 restraining the rebound of homes sales during the period. However, in the third quarter, mortgage lending standards were eased, and BMO Economics expects this to translate into net mortgage credit creation, resulting in sustained higher home sales.
To view a full copy of the report, visit www.bmocm.com/economics.
About BMO Harris Bank
BMO Harris Bank provides a broad range of personal banking products and solutions through more than 600 branches and approximately 1,300 ATMs in Illinois, Wisconsin, Indiana, Kansas, Missouri, Minnesota, Nevada, Arizona and Florida. BMO Harris Bank's commercial banking team provides a combination of sector expertise, local knowledge and mid-market focus throughout the U.S. For more information about BMO Harris Bank, go to the company fact sheet. Banking products and services are provided by BMO Harris Bank N.A. and are subject to bank or credit approval. BMO Harris Bank® is a trade name used by BMO Harris Bank N.A. Member FDIC. BMO Harris Bank is part of BMO Financial Group, a North American financial organization with approximately 1,600 branches, and more than CDN $586 billion in assets (as of July 31, 2014).