Fannie Mae Finds Rising Interest Rates Will Not Impair Recovery!

Fannie Mae recently released a report about the increase in mortgage rates we have witnessed in the last couple of months.  Though some economists are saying there will be a big impact on the housing market’s recovery, the report states, “History suggests that interest rate increases at the level recently witnessed will not stop the current housing recovery.”

The report continues to say, "What we see through the ups and downs of rate changes is that sellers are reluctant to lower prices, (and) homebuyers were also willing to find ways to stretch their resources…” said Mark Palim, who led the Fannie Mae study.

The study focused on the last 20 years of mortgage rate history. In October 1993 to December 1994 the interest rates rose from 6.8% to 9.2%. During that time home prices leveled off and then fell only slightly. The second rate climb was from October 1998 to March 2000 where the report said there was not any effect on the home prices.

Palim also said that interest rates and home prices track economic trends. This means when the economy is doing better the interest rates will rise but so will hiring and income, meaning people will be able to afford more.

It is also important to take into consideration that historical averages for mortgage rates have been around 6%. A 4.5% interest rate is still looking good!

Jessie Eide is a Realtor at EXIT Realty Foothills specializing in the Claremont community and helping people invest in Real Estate all along the foothills. For more information call 626.523.1822 or visit her website at www.SimplyYourRealEstate.com to have free access to the most comprehensive MLS Listing Service.