The stock and bond markets will be the two key sets of asset classes that investors, traders, and would-be home buyers or those looking to refinance will be watching in the coming months. The direction of stocks and especially bonds from the results of what impact inflation and economic growth have on the economy dictates what home loan rates may be doing in the near future. Also, home price gains are in the mix to watch.

The closely watched and benchmark stock index, the S&P 500, hit a record closing high back in January of this year and has since lost 30% of its value before recovering somewhat. The yield on the U.S. 10-year note was 1.52% in January and has surged to 3.12%. The 30-year fixed-rate mortgage was 3% in early January and is now nearly 6% mainly due to soaring inflation.

If the economy slows, investors may look to the safety of the bond markets and if prices rise, interest rates and borrowing costs should decline.

What about the housing market? Price gains are at lofty levels with the number of homes for sale on the market at low levels. CoreLogic's Patrick Dodd, president, and CEO at CoreLogic recently said, "With 30-year fixed mortgage rates much higher now, we expect to see waning buyer activity because of eroding affordability. Consequently, our forecast projects slowing price growth over the coming year."

Source: Mortgage Market Guide