What Happens When Interest Rates Rise? Freddie Mac released its U.S. Economic and Housing Market Outlook for June showing the effects rising interest rates are having on certain markets around the country and the overall housing recovery.
Interest rates for 30-year, fixed-rate mortgages have risen about 0.5 percentage points over the past several weeks and are expected to hover around 4.0 percent during the second half of 2013. With rising mortgage rates, expect a sharp decline in refinance volume in the second half of this year; refinance originations are expected to total about $1.1 trillion in 2013, down from $1.5 trillion in 2012.
At today’s house prices and income levels, mortgage rates would have to be nearly 7 percent before the U.S. median priced home would be unaffordable to a family making the median income in most parts of the country. "The recent upturn in interest rates is sparking fears among some that the nascent economic and housing recoveries will be choked off before they produce sustained growth. However, with the exception of high-cost markets, which are already challenged with affordability, house prices in most of the country are very affordable,” said Frank Nothaft, Freddie Mac vice president and chief economist. “So while rising interest rates will reduce housing demand, rates would have to increase considerably more before the reduction in demand for home purchases would be substantial. Nothing in the recent trends suggests that we need to fear a major slowdown. A gradual rise in interest rates will not derail the recovery, and are an indication that the overall economic situation is improving." Published with permission from RISMedia.
Associate Broker, GRI
Coldwell Banker High Country Realty
706-633-0644 Mobile/Direct
email:donna@donnayates.com
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