The one percentage point increase in mortgage rates over the past two months will not stop the recovery in the housing market, according to a new report by the Wells Fargo Securities Economics Group.
“Home sales and housing starts should continue to steadily improve even as interest rates edge higher, provided that mortgage rates do not increase at a faster pace than underlying economic conditions improve,” according to the July 8 report.
The WFS economists point out that 19-month period of below 4%
“Thus, ultra-low rates may have actually put a damper on many individuals’ ability to obtain a mortgage,” the monthly “Housing Data Wrap-Up” report says.
Meanwhile, it appears low mortgages rates had a larger impact on home prices than sales.
“Prices of new and existing homes have surged as buyers bought larger and more expensive homes and investors, attracted by relatively higher rental yields, rushed into the market to buy up lower-priced homes and convert them into rentals.” This demand for rental properties priced many potential homebuyers out of the market.
The good news is that interest rates have moved higher due to the improvement on the jobs front.
“With employment conditions improving, consumer confidence has increased and more families are looking to buy a home. Buying plans and prospective buyer traffic are both trending up and should continue to do so,” the June WFS report says.
