Three weeks and three-consecutive mortgage-rate increases. That's the lead story on the financing-front of housing. The rate on the 30-year fixed-rate loan is up over 20 basis points nationally based on's survey of mortgage lenders.

In fact, rates are up to levels last seen in late-March and early-April.

There are a couple of variables at work in the mortgage market. For one, the economy and job growth have shown signs of picking up pace over the past month. More economic growth and more job growth means more loan demand, which pressures interest rates to rise.

More recently, speculation over the Federal Reserve and quantitative easing have pushed rates higher. Specifically, investors and speculators believe it's more likely that the latest round of quantitative easing could end sooner than later. The Fed itself has suggested as much: Chairman Ben Bernanke, speaking to Congress this week, didn't rule out the possibility of tapering the latest round of quantitative easing (QE3) by Labor Day if the labor market continues to improve.

Quantitative easing is simply the Federal Reserve injecting money into the banking system by purchasing U.S. Treasury notes and bonds and mortgage-backed securities. The Fed purchases these instruments by creating new money, which it credits to banks' Fed account when the banks sell the instruments to the Fed.

Lately, the Fed has been purchasing theses instruments at the rate of $85 billion per month. The purchases create demand, which, in turn, reduces yield to produce the record-low mortgage rates we've experienced in the past year.

To be sure, Labor Day isn't set in stone, and the Fed is still concerned the labor market could backslide, but it's becoming more apparent quantitative easing won't go on indefinitely. This means a floor has been placed under mortgage rates, so it's become more likely that rates have gone as low as they will go (sans an unseen economic catastrophe).

If housing continues to pick up pace, the Fed will have even more reason to back away from quantitative easing. Housing appears to be picking up pace.

Sales of existing homes increased 0.6% to an annual rate of 4.97 millions units for April. Sales of single-family homes were particularly robust, increasing 1.2% for the month. Existing-home prices also improved strongly. The median price of an existing home increased 4.8% to $192,800 in April – the highest price of the recovery.

We've frequently mentioned that rising prices spur more supply to come to market. That's exactly what's happening. An additional 230,000 units came to market in April. This lifted the supply of existing homes to 5.2 months from 4.7 months at the current sales rate.

On the new-home front, sales growth was even more dramatic, with sales rising 2.3% to 454,000 units on an annualized basis in April. Meanwhile, prices soared, increasing 8.3% to a record median price of $271,600.

That said, new homes aren't pouring into the market like with existing homes: New homes for sale rose only 5,000 for the month, which means inventory remains low at 4.1 months.

In short, the housing market is shaping up nicely as we head into the summer selling season. We expect sales to improve materially as the summer progresses.

 Courtesy of Jessica Regan.

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