Falling Mortgage Rates Lift Homebuilders

NEW YORK (TheStreet) -- Declining mortgage rates, along with word that a government tax-credit program for first-time homebuyers could receive an extension, appeared to boost shares of homebuilders Thursday.

According to data issued by Freddie Mac Thursday, the average interest rate on a 30-year fixed mortgage declined to 4.87% this week, the lowest level since it hit 4.82% in May and among the lowest since Freddie Mac began keeping records in 1971.

It was the fourth straight weekly drop, and the continued easing of credit in the housing market had its obvious effect: "Such low rates are spurring mortgage demand," Freddie's chief economist, Fred Nothaft, said in a statement.

Home Builder Horror Show

Meanwhile, the New York Times reported Thursday that Democrats on Capitol Hill are working with the Obama administration not only to push back the expiration date on a program offering tax breaks of up to $8,000 to first-time homebuyers, but to expand the credits to include current homeowners.

Designed to ease the disastrous housing market and stimulate the economy, the program was scheduled to end after November.

Other recent signs have encouraged investors to place bets on what they hope is a nascent housing recovery, most notably a well-documented U-turn in home prices.

Still, plenty of skeptics argue that rising unemployment will hamper home sales enough to offset any increase in demand spurred by low rates or tax credits.

Market players appeared to shrug off those concerns Thursday. Among housing stocks, Lennar(LEN Quote) shares led the gainers, jumping 9% to $14.35 in afternoon trading.