Potential homebuyers have been watching and waiting for mortgage rates to reach near-record lows. At the same time, with rates so impossibly low, now is perhaps the best possible time for potential homebuyers to take the plunge. The recent spike in mortgage rates is a double-edged sword for the housing market. With the government pulling its support of mortgage-backed securities (MBS) and artificially lowering mortgage rates, buyers will be repelled by rising rates. At the same time, rates are projected to continue to rise, so now could be the perfect time.
“We are still far below peak home price levels, but tight supplies in many areas coupled with continued demand for single family homes should help us close the gap,” CoreLogic CEO Anand Nallathambi told NBR.com.
The average interest rate for a 30-year fixed mortgage hovers around four percent, up from last week’s 3.91 percent. Just last month, Fannie Mae released a report detailing Americans’ optimistic view of the housing market and how now is the perfect time to buy a home.
Doug Duncan, senior vice president and chief economist at Fannie Mae stated "Sentiment toward selling a home appears to be catching up with the strengthening housing market,” adding “In turn, increased housing supply could serve to temper increasing consumer home price expectations. We will closely watch the potential impact of rising mortgage rates on consumer housing sentiment in the coming months."
Projections persist that unless home prices decrease by around 15 percent, interest rates will most likely impact buying a home a great deal. In a recent Mortgage News Daily piece, concerns were expressed that the Fed might not be picking up on this trend in interest rates and that nothing might be done about it. Overall, we’re looking at a 15-month high in terms of mortgage rates climbing in recent months.
"Potential buyers who entered the market a few months ago set their price objective based on a lower mortgage rate. It will therefore be a payment shock when they look to receive financing at today's rates. Based on the average home value, this rise in rates is equivalent to an additional $50 in monthly payments," said Michelle Meyer of Bank of America Merrill Lynch.
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