How might the Greek debt crisis be good for the United States?

Last week, we counted three possibilities: cheaper oil, greater international investment in the United States (as investors flee the eurozone for America's embrace), and a longer period of easy money from the Federal Reserve. Today, the Wall Street Journal's Nick Timiraos finds a fourth, related benefit for the United States in the short term: historic low mortgage rates despite the Federal Reserve pulling back its mortgage-securities purchase program.



Conventional wisdom held that mortgage rates would rise as the Fed pulled back from propping up the market. Instead, many in the industry now say rates could drift as low as 4.5% this summer from 4.86% now, instead of rising to 6% as some economists projected, making for significantly lower payments for Americans buying homes or refinancing their mortgages.



Here's what's happening. The European crisis is making investors nervous about buying bonds from countries across the Atlantic. So they're flocking to park their cash in US debt. High demand for US debt drives down the yield, or interest rate, on our bonds. Mortgage rates hold hands with the 10-year Treasury yield, which fell to 3.2% last week. That brought rates on 15-year mortgages down to 4.24% last week, "the lowest since Freddie began its survey in 1991," according to Timiraos. Thirty-year mortgage rates are back to their December 2009 levels.

This is good news for a home market some feared would face a terrible summer. Since the $8,000 housing credit expired last month, some worried that the demand for new homes had squeezed itself into the first four months of 2010. But the return of low interest rates could make for a buyers market, since every percentage point decline in mortgage rates reduces home prices for the buyer by roughly a 10%. "If the current rates hold," Timiraos writes, "that could help stabilize prices and allow current homeowners to sell existing homes without substantial price cuts."

Update: The headline comes with a caveat: unless those home owners recently bought stock.

