The rise in mortgage rates over the last couple of months has been “significant” and could hamper the housing recovery, economists note in Fannie Mae’s Economic Strategic Report for July. However, home sales so far have been little affected by the spikes, they say.
The 30-year fixed-rate mortgage has risen more than 110 basis points from the first week of May to the end of June. In early July, it started to ease somewhat. Still, the report says that despite the increases, rates are still near historical lows. It’s the sudden rise in such a short time that has been alarming, the economists note.
Mortgage applications for home purchases have fallen about 9 percent since early May, when the rise in rates began. However, pending home sales during that same period rose to the highest level in more than six years. Many of those sales, though, are in cash, which means they may be less tied to the rise in mortgage rates.
Fannie Mae economists predict that mortgage rates will continue a gradual rise and average 4.7 percent in the fourth quarter. That is about 40 basis points higher than economists had predicted a month ago.
Economists predict home sales will rise about 8 percent in 2013, and the median home price will be $189,000 for existing homes and $276,000 for new homes in the fourth quarter.
Source: “Fannie Mae Expects Rates to Continue Higher,” Mortgage News Daily (July 22, 2013)