Magazine article American Banker

In Housing, S&P's Influence Indirect

Magazine article American Banker

In Housing, S&P's Influence Indirect

Article excerpt

Byline: Maria Aspan

Housing industry executives awoke on Monday to a world reshaped by the U.S. downgrade, but for their corner of the financial markets the pain is mostly psychological.

Standard & Poor's Corp.'s decision on Friday to lower the U.S. debt rating could, in theory, push up interest rates and the prices consumers pay for new mortgages, further slowing originations.

But mortgage lenders and analysts said on Monday that a sudden jump in rates is unlikely.

Instead, the biggest immediate costs to the housing market will be in terms of morale.

"The consumer psyche is really what it comes down to, and consumers are going to continue to withdraw," said David Lykken, managing partner of KLS Consulting, which does business as Mortgage Banking Solutions.

The U.S. debt downgrade, coming amid economic uncertainty, is "going to make consumers want to stay put. ... Until we get to the bottom of this economic reset, we're not going to have any housing growth," Lykken said.

Investors are increasingly shuttling money from stocks to Treasuries, which is likely to keep interest rates near historic lows.

"It doesn't appear that this is going to have a big impact on interest rates, which is not surprising. The world is just very depressed about the economy going forward," said Richard Green, director of the University of Southern California's Lusk Center for Real Estate.

The average fixed 30-year mortgage rate actually fell 15 basis points last week to an average of 4. …

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