By Abraham Mendelson ‘17In a week when the stock market slid on concerns of faltering economic growth in Europe and Asia as well as greater fear of Ebola’s spread, some market indices were still able to rally.  In fact, the S&P’s Supercomposite Homebuilding Index had its best week since January, climbing 6%, and this positive data may signal that the US economy will not falter in the face of a global economic slowdown.One factor in the housing market’s rally may be the economic slowdown itself.  The recent stock selloff from global uncertainty has made investors turn to safer investments such as Treasury bonds.  Increased demand has increased the price of the bonds which, in turn, lowers the yield.  Since mortgage rates tend to follow treasury yields, the average 30-year fixed mortgage rate has declined, reaching below 4% on October 17.  While this lower rate has increased confidence in the housing market, these low rates are probably only temporary.  Although the markets are volatile at the moment, concerns will settle and the flux of investors that flocked to Treasury bonds to lower the yields will just as quickly turn away.However, lower mortgage rates were not the only factor driving confidence in the housing market. The number of housing projects started, or housing starts, rose 6.3% in September, which greatly exceeded forecasts of 4.6%.  This strong gain was primarily the result of apartment construction, and while single-family house starts also rose in September, they did so at just 1.1%.  Single-family house starts are more economically significant than those of apartment buildings, but the latter’s 22.7% increase from a year ago over the first nine months is very convincing that this has been a strong year for homebuilders.  Moreover, building permits increased by 1.5% in September, indicating that more construction is underway.A crucial factor to consider is whether demand and sales conditions are poised to take advantage of the expanding housing supply.  Consumer confidence has been on the rise, in spite of the recent week’s market turmoil, and employment has increased at an average rate of 200,000 jobs a month to bring unemployment down to 5.9%.  The positive performance of these metrics compounded with the low mortgage rates in the short term indicate a push in demand for housing purchases.  That demand could go unmet, though, since mortgages have been restricted to those with excellent credit since the 2008 financial crisis.  However, the Federal Housing Finance Agency (FHFA) wants to exploit the convergence of rising employment, expanded homebuilding, and lower mortgage rates, and last week announced steps to incentivize lending to borrowers with lower credit scores.  Many analysts consider this a crucial step forward in the housing market’s recovery from 2008, consistent with Fed Chair Janet Yellen’s criticism of exceedingly tight lender restrictions on mortgage availability.The most important aspect of the FHFA’s plan is that it limits these incentives for lending to borrowers with certain credit deficiencies.  While the status quo inhibits the housing market from reaching maximum efficiency, encouraging too much lending could give rise to another housing crisis.  The FHFA should be aware of this risk and, presumably, its lending stimulus plan will have effective controls in place.  The housing market has benefitted from great gains this year and its persistence in the recently pessimistic marketplace shows the magnitude of the housing market’s turnaround.  Furthermore, the introduction of the FHFA’s plan will allow the economy to capitalize on the strength in the homebuilding industry.  If these expectations in the housing market’s sustained growth come to fruition, it will signal the US economy’s strength in the face of a weak global economic outlook.Sources:http://www.bloomberg.com/news/2014-10-17/homebuilders-head-for-biggest-weekly-gain-in-nine-months.htmlhttp://online.wsj.com/articles/u-s-housing-starts-up-6-3-in-september-1413549111http://www.bloomberg.com/news/2014-10-17/rates-below-4-leave-u-s-refinancing-banker-sleepless.htmlhttp://www.bloomberg.com/news/2014-10-17/housing-starts-in-u-s-rose-in-september-to-1-02-million-rate.htmlhttp://www.nasdaq.com/article/us-housing-starts-up-63-in-september--update-20141017-00458http://www.washingtonpost.com/blogs/where-we-live/wp/2014/10/16/fixed-mortgage-rates-plummet-to-14-month-lows/