How the economy is affecting the housing market

Amidst high unemployment, weak consumer confidence, a debt crisis in Europe and a weakened Asian market, the U.S. market was recently hit hard with the Dow Jones reporting a 513 point drop. These economic factors affected the housing market as mortgage interest rates dropped right after the stock market fell.

In an interview with CNBC, Melissa Cohn of Manhattan Mortgage Company said that consumers looking to buy homes are are turning to economic data and real estate market reports as indicators of whether or not it is a good time to buy.

Michelle Meyer at Bank of America/Merril Kynch told the news source, "We are revising down our forecast for housing sales and starts over the next year and a half, and now see downside risk to our home price forecast."

The Orange County Register reported some analysts think the economic climate will make potential homebuyers nervous and keep them out of the market. On the other hand, some real estate agents believe the recent stock market loss could encourage consumers to pull their money out of the stock market and invest in real estate.

Dennis Smith, co-owner of Stratis Financial in Hunting Beach, told the news source that 30-year fixed-rate mortgages could drop below 4.1 percent due to a shrinking economy. He argues that investors are not focused on the fundamentals such as GDP, employment and government spending, and that can cause a stall in the housing market.  

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