Is he right? We asked Ara Hovnanian, CEO of the sixth-largest homebuilder in America, Hovnanian Enterprises, where he believes housing is headed.
Mortgage rates are starting to inch up but they're still at some of their all-time lows. Though up to 3.9% last week from 3.34% in early May, that's still far below the 2006 mortgage rates of 6.4%.
Potential homebuyers have been hurrying their mortgage applications to lock in rates before they go up. Mortgage applications moved up nearly 5% on a seasonally adjusted basis in the first week of June compared to the last week of May, according to the Mortgage Bankers Association (MBA). Still, applications are 36% off from the peak at the start of May.
Ara Hovnanian doesn't believe a rise in interest rates to, say, 4.5% will hurt housing at all. Speaking to Talking Numbers, Hovnanian agrees with Cramer on the ability of homebuyers to afford homes in this current environment.
Hovnanian specifically cites the Housing Affordability Index which measures the relationship between median home prices, income, and interest rates. A lower number indicates homes are more affordable. The index is currently below where it was in 2011.
"If mortgage rates went up about 275 basis points (2.75%) from where they were last week, [housing affordability] would still be better than they've ever been," says Hovnanian. However, he warns that could change if home prices increase along with rate increases.
Hovnanian also says that his own company looks at demographics in its long-term planning rather than keeping an eye on mortgage rates.
However, are these data enough to be optimistic with housing or are there other factors investors should be aware of before getting bullish on homebuilders?
We ask Talking Numbers contributor Steve Cortes, Founder of Veracruz TJM, to look at the numbers and give his take on what's ahead in housing.
To hear the rest of Hovnanian's interview on his business and for Cortes' analysis, watch the video above.