Despite news that the 30-year fixed rate has surpassed the 4% mark, economists continue to be cautiously optimistic about the housing market.
“Increases in rates would not be occurring if there wasn’t economic growth,” Steve Blitz chief economist at ITG Investment Research told Forbes last month. “If people thought the economy was heading south, even with absence of quantitative easing, the rates wouldn’t rise.”
Over the past few months the 30-year fixed rate, which has been hovering well below 4% has been trending upward, creating concern that recovery has halted.
Before the rate increase, April home prices rose 12% over a year ago with signed contracts in May at the highest level since 2006. However, by June existing home sales dropped 1.2% as rates started to rise. As of the end of July, the 30-year fixed rate stood at 4.31%, which is a drop from 4.37%.
Market specialists expressed concern that after months of recovery, that rising rates might hamper growth and overall recovery. However Blitz says that the housing market rebound is more of a symptom of recovery and not indicative of its overall direction. “There may be pent up demand, but there’s no pent up wealth to go buy a house. Housing will not lead the economy as it did from 2004-2006,” Blitz adds. “Instead, it will grow with the economy and not lead it.”
Is Now Still A Good Time To Buy?
According to the National Association of Realtors (NAR), existing homes sales stand at its highest level since November 2009. In fact NAR’s chief economist, Lawrence Yun refers to growth as “overwhelmingly positive.”
Mike Corn, CEO and co-founder of CU Realty Services says that data released by the U.S. HUD and the U.S. Census Bureau show an increase in builder confidence and that CoreLogic expects home prices to continue to rise.
Although rates and prices have inched up, Corn says that he believes the market will continue to improve and that this trend may drive more consumers to consider a credit union mortgage loan. “As more sellers list their homes to take advantage of improving market values, many will become buyers in need of a mortgage,” he says in a statement. “And with loan rates slowly creeping up, many home buyers are looking to purchase sooner rather than later. For credit unions with the right marketing strategy in place, there’s a great opportunity to provide homebuyers with the mortgages they need.”