From CNN/Money:
Mortgage rate rise pressures housing recovery
Mortgage rates went up again this past week, putting more pressure on a weak housing market and further dimming prospects for a quick recovery.
Low rates helped create and sustain the last housing boom. And rates remained manageable over the past two years as the market fell, buoying prices and enabling the bubble to deflate gradually rather than with a sharp pop.
But now, rates on a 30-year, fixed-rate mortgage, which have floated in a narrow range of 6.14 percent to 6.34 percent all year, have begun a steady rise. Doug Duncan, chief economist for the Mortgage Bankers Association (MBA), expects them to top out near 7 percent by the end of the year.
Rising rates, among other factors, have caused the MBA and the National Association of Realtors to push back their forecasts for a home-price recovery. Both groups are now looking to early 2008, compared with a previous outlook for mid-2007.
…
When interest rates rise, they add to the size of a borrower’s monthly mortgage payment. Rates had been at 6.16 percent as recently as May 3. The 0.26 percent increase since then represents a jump of $30 a month on a $200,000 loan.Buyers look carefully at monthly payments to gauge a home’s affordability. Higher monthly costs can limit the amount they can offer for a home.
And if rates do go as high as 7 percent, that could have a substantial impact on buying patterns, according to Keith Gumbinger of financial publisher HSH Associates, which tracks the mortgage industry.
“It would make it more likely that [buyers] would sit on the sidelines,” he said. “That would put downward pressure on housing prices.”
~~~PBS:) Housing in the United States is taking a big hit …..
Housing in the United States is taking a big hit as “too-good-to-be-true” home loans fail, refinancing dries up, and foreclosures surge. How did the market plummet so quickly — and are current homeowners paying the price? NOW revisits a California town whose real estate fortunes have taken a hard turn for the worse.
Video: http://www.pbs.org/now/shows/317/video.html
Past Due and Pay Day
http://www.pbs.org/now/shows/317/index.html
The real estate reality kicks in !!!
PBS:) Housing in the United States is taking a big hit …..
Housing in the United States is taking a big hit as “too-good-to-be-true” home loans fail, refinancing dries up, and foreclosures surge. How did the market plummet so quickly — and are current homeowners paying the price? NOW revisits a California town whose real estate fortunes have taken a hard turn for the worse.
Video:
Past Due and Pay Day
http://www.pbs.org/now/shows/317/index.html
The real estate reality kicks in !!!
If mortgage rates reach 7% the market has a reasonable chance to return to equilibrium.
As crazy as it seems, maybe people will be looking to buy homes based on a realistic assessment of what they can afford. That’s going to be a bitter pill for many sellers of homes to swallow, especially those who overpaid over the last 2-3 years.
#2 Lindsey I would change that to over the last 3 or 4 years.