Despite all the grim news about gas prices and recession, there are more than a few encouraging signs popping up in the national economy that aren't getting a lot of attention.

Take worker productivity in the U.S., for example. It jumped by 2.2 percent in the latest quarter -- and that was on top of a 1.8 percent gain the quarter before.

Why's that significant for housing and real estate? Because rising productivity generally points to lower inflation … and lower inflation fears help keep interest rates low. Just ask the Federal Reserve, which keeps an eagle eye on productivity.

And in fact we continue to see mortgage rates hovering near record lows. Thirty year fixed rate loans dropped again last week -- the second week in a row -- and went under the six percent mark to 5.9 percent, according to the Mortgage Bankers Association of America. Fifteen year rates slid to 5.5 percent.

Equally important, the number of consumers applying for mortgages to purchase homes took a healthy jump last week -- up 12.1 percent, according to the Mortgage Bankers. Applications for FHA mortgages -- the hottest product in the home purchase space right now -- were up by 13.2 percent.

The surge in loan applications is important because it points to potentially higher home sales in the months ahead. Lower home prices in major markets, plus the arrival of the long-awaited "jumbo" loans in high cost areas, are definitely pushing applications.

But despite these positive signs for the housing economy, there are some troubling developments as well. Last week's Senior Loan Officer Opinion Survey -- a poll of bankers across the country conducted by the Federal Reserve Board -- found that "tightened lending standards" are major impediments keeping home buyers on the sidelines.

Toughened underwriting restrictions that began a year ago with subprime loans have now "spilled over into the overall mortgage market including prime," according to the Fed survey. 62 percent of all banks reported imposing more restrictive loan standards during the first quarter of this year compared with last year.

What the Fed report documents, in effect, is that large numbers of home sales that might otherwise be occurring -- helping to pull us out of the real estate slump -- are being prevented by lenders' narrowing or closing of their mortgage windows.

Until they start loosening up, it will be tough to move to a full real estate recovery.

We'll keep monitoring that part of the lending market equation for you, and we'll let you know when we see some positive signs of change.

Published: May 15, 2008

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Kenneth R. Harney writes an award-winning, nationally-syndicated column on housing and real estate from Washington, D.C. He is also managing director of the National Real Estate Development Center, a professional education company. He is a past member of the Federal Reserve Board's Consumer Advisory Council, a committee that by federal statute reviews all Fed actions on home mortgage, consumer credit and banking industry regulation. He served as a member of the U.S. Department of Housing and Urban Development's Working Group on Computerized Loan Origination (CLO) systems, and is a member of the Editorial Board of the Fannie Mae Foundation's journal, Housing Policy Debate. He is the author of two books on mortgage finance and real estate.