Mere spoken words can roil mortgage lending — and did, when Federal Reserve Chairman Ben S. Bernanke said in June that the Fed could scale back bond buying later this year: Loan rates are still heading up.
Wednesday's release of minutes from the Federal Open Market Committee's July 30-31 meeting confirmed a near consensus for a need to slow down “quantitative easing” — later rather than sooner. But the Fed isn't the main one for leery lenders to watch in the long term, said David Stevens, president and CEO of the national Mortgage Bankers Association.
Demographics — that's the thing, he told Oklahoma lenders Thursday.
About 70 percent of all households, counting renters and homeowners, are non-Hispanic white, he said, but only about a third of future households will be.
Blacks and Hispanics, who are comparatively younger and have more children, are driving the future of housing as whites age and have fewer children, he said.
Stevens guessed, correctly, that the demographics of his Oklahoma City audience probably did not match the future of its customer base. His flight from Chicago was canceled because of mechanical problems, and he spoke by phone as someone else presented his slides for the meeting at the Central Oklahoma Home Builders Association Event Center.
The Fed's aim to eventually scale back its $85 billion monthly bond buying, which keeps yields low — therefore helping keep mortgage rates low — comes in response to an improving economy, especially housing, which has begun returning to pre-recession levels of construction and home sales.
House prices continue to recover, rising 7.2 percent nationally from the second quarter of 2012 to the second quarter of this year, the Federal Housing Finance Agency reported Thursday. Prices rose 2.1 percent from the first quarter to the second this year, the agency said.
In Oklahoma, prices of houses tracked by the agency rose 5.27 percent year-to-year and 0.53 percent quarter-to-quarter, the Federal Housing Finance Agency said.
“The housing market experienced one of its strongest quarters since the boom in the middle of the last decade,” said Andrew Leventhis, the agency's principal economist.
But just mentioning the prospect of the Fed easing up gives some lenders — and, perhaps, potential buyers — heartburn. The average rate for a 30-year fixed mortgage ended this week closer to 5 percent than 4 percent, while a month ago the average was under 4.5 percent — and three months ago it was under 4 percent.
Stevens pointed out the big picture.
“It's a story about a strengthening economy — a good thing — that the Fed is stepping out of the mortgage market,” he said, notwithstanding pain on Wall Street and among lenders, which are letting employees go as interest rates rise and home sales moderate.