For the past year (if not longer), we've been preaching that economic growth, not interest rates will drive housing. To be sure, it was encouraging to see purchase-application activity pick up on lower rates. Unfortunately, cash is still king. The NAR's latest sales data show cash buyers comprised 32% of existing home sales in December. Therefore, a 2% uptick in purchase applications isn't as meaningful as it would have been a decade ago.

Whether mortgage rates are lower or higher, they don't appear to have much impact on home sales these days. Sales of existing homes bounced back in December from a very weak November, but not by much. Sales for the month came in at 4.87 million units, which is about where they were 18 months ago. Unfortunately, sales remain significantly below where they were this past summer. Interestingly, during that time, mortgages rates were rising as monthly sales were rising. Source: Econoday

For this coming week we'd like to see the Federal Reserve's data show stronger economic growth. In addition, we'd like to see that data supported by strong fourth-quarter-2013 GDP growth. If strong economic growth is supported with strong job growth, a 5% rate on the 30-year loan will still be an affordable rate in the grand scheme of things.

Courtesy of Jessica Regan.

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