Why 5 Percent Mortgage Rates Are Not A Threat

Dated: 06/28/2018

Views: 808

Mortgage rates are on the rise. Could that derail sales? According to First American’s Potential Home Sales model, even if the 30-year fixed-rate mortgage rose to 5 percent, the impact on the housing market would be modest.

 

Many economists are predicting that the 30-year fixed-rate mortgage will average 5 percent by the end of 2018 or early 2019.

 

First American’s Potential Home Sales model estimates the potential for existing-home sales based on market fundamentals. The market potential for existing-home sales based on current fundamentals is 6.11 million at a seasonally adjusted annualized rate. If the 30-year fixed-rate mortgage rose to 5 percent, the impact would be a slight decline to 6.1 million existing-home sales, according to the model.

 

“The reason mortgage rates are rising—positive economic conditions—is also causing household income to rise, which helps offset the increase in borrowing costs from higher rates,” Mark Fleming, First American’s chief economist, writes in a column at the company’s Economic Center Blog.

 

Also, home buyers can adjust to higher mortgage rates by taking a lower rate available through an adjustable-rate mortgage than a fixed-rate mortgage or by purchasing a less expensive home, Fleming notes.

 

“The housing market is flexible and can adjust to moderately higher mortgage rates without significant impact,” Fleming writes. “The likely rise in mortgage rates is not the worry for first-time home buyers, but whether they can find something to buy in today’s supply-constrained market.”


Source:  

https://magazine.realtor/daily-news/2018/06/19/why-5-mortgage-rates-aren-t-a-threat?om_rid=AATVMk&om_mid=_BbNT5FB9prEfvQ&om_ntype=NARWeekly

Blog author image

Brad Ahlstrom and Steve Coons

Brad Ahlstrom and Steve Coons were both born and raised in Mesa, AZ and are 4th generation Arizonans. As 1st cousins, they grew up watching their grandfather, Ross Farnsworth, develop land into retire....

Latest Blog Posts

Why 5 Percent Mortgage Rates Are Not A Threat

Mortgage rates are on the rise. Could that derail sales? According to First American’s Potential Home Sales model, even if the 30-year fixed-rate mortgage rose to 5 percent, the impact on the

Read More

Fierce Competition For Home Hunters

Competition will be fierce for home hunters this season: ZillowThe median value of a US home rose 8% to $213,146 while inventory shrunk by 9%BY VERONIKA BONDARENKOThe U.S. housing market

Read More