In housing and mortgage news this week:

• A survey of housing prices revealed a sharp drop in year-over-year values as of the end of April
• Existing home sales recorded a mild uptick in May

Despite the bad news/good news nature of the above developments, they are not as contradictory as they might seem. They do, however, have markedly different implications for existing home owners and potential buyers.

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A sharp jump in mortgage rates was the week’s most significant development.

• 30-year mortgage rates rose to 6.32%, largely in response to growing inflation fears
• Federal Reserve officials may also respond to the inflation threat, as they’ve begun to hint at possible hikes in the Fed rate later this year
• The grim news on the interest rate front overshadowed what otherwise would have been a bright spot, a bounce back in mortgage application activity

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Recently-released data on home sales sent mixed signals to prospective buyers:

• The S&P/Case-Shiller index of home prices in 20 major markets showed a 14.4% year-over-year decline through the end of March, 2008
• The U.S. Commerce Department reported that the number of new home sales increased 3.3% in the month of April  

While conflicting signals on housing might give home buyers reason to pause, two other developments might spur them to action:

• Revised GDP data strengthened the earlier indication that the U.S. economy avoided slipping into recession in the first quarter of 2008
• Mortgage rates broke out of a month-long holding pattern and showed hints of a possible upward trend

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In a mixed week of news, perhaps the most important outcome is that mortgage rates remained at attractive levels:

• Fed Chairman Ben Bernanke conceded there was a possibility that the economy was in recession
• A provision to give bankruptcy judges more latitude to ease mortgage terms appeared headed for defeat
• Housing sales posted a rare rise, even as prices continued to fall
• 30-year mortgage rates remained little changed for the second week in a row

As much as the above might seem a mix of good news and bad news, overall it translates to a decent environment for home and mortgage shoppers.

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Treasury Secretary Henry Paulson calls for national licensing for mortgage brokers in an effort to guard against fraud. He also calls for clearer disclosures to borrows on the terms of their home loans.

For more information see:
Paulson Wants Stronger Oversight of Mortgage Industry
Paulson says US blueprint calls for stronger oversight of mortgage lenders
Current Housing and Mortgage Market Developments