Looks like it's back to mixed signals on the economy and housing and mortgage rates.

On the one hand, we've seen resale and new housing sales up nationally, regionally and in dozens of local markets during the past month.

Sales of existing houses were up by five and a half percent in the latest month, according to the National Association of Realtors -- and they were up by much larger percentages in former boom markets where short sales and foreclosures account for 40 to 50 percent of all transactions.

On the other hand, the economy as a whole is looking weaker -- and that usually doesn't bode well for housing. The Commerce Department reports that the Gross Domestic Product, which measures national economic activity, decreased during the third quarter by three tenths of a percent.

With the credit crisis, gas prices and stock market losses that have rattled us for months, a drop in the index was widely expected, but it turned out to be a lot smaller than many bearish economists had predicted. Their forecasts were for twice to three times as bad -- a decrease in Gross Domestic Product of as much as one full percentage point.

Well, that didn't happen.

Also, even though consumer spending was down, the federal Bureau of Economic Analysis reports that consumer personal income was up in September by two-tenths of a percent and disposable income was up by $25.7 billion.

So it looks like households are still seeing modest increases in income, but they're not spending it as much as they used to -- and that holds back economic growth.

One of the biggest uncertainties in housing right now is the mortgage market, where rates have risen even while 10 year Treasury note rates -- the benchmark for pricing 30-year mortgage rates -- have declined.

The "spreads" between Fannie Mae and Freddie Mac mortgage securities and the 10 year Treasury bond have widened recently, and that's one reason why rates to home buyers jumped last week.

In its survey released October 5, the Mortgage Bankers Association reported 30-year fixed rates at 6.47 percent, up from 6.26 percent the week before.

In reaction to the quarter point jump in rates, fewer people applied for mortgages to buy houses last week. Applications fell by 14.4 percent for buyers using conventional loans, and by 12.8 percent for those using FHA financing.

With the economy slowing, the odds are that mortgage rates won't jump a lot higher. But then again -- don't look for bargain rates of 6 percent and below anytime soon either.

Published: November 11, 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.