Nowhere to Go but Up? How Increasing Mortgage Rates Could Affect Housing
MCLEAN, VA--(Marketwired - Feb 23, 2018) - Freddie Mac (
Insight Highlights
Quote: Attributed to Len Kiefer, Deputy Chief Economist.
"History has shown that periods of rising mortgage rates can be challenging for U.S. housing and mortgage markets. In historical episodes of rising rates, home sales slipped, housing starts stalled, and mortgage originations swooned. Home builders are doubly affected by increasing mortgage rates because they use financing to fund construction costs. When interest rates on funding for new construction and mortgage rates rise simultaneously, home builders are squeezed by a fall in demand and an increase in costs. However, though rates have moved higher recently, mortgage credit is still historically cheap if borrowers can get in while the getting is good.
"If rates rise, will housing markets follow the historical precedent, or will they buck the trend and maintain momentum? It's uncertain, but with a solid labor market, rising household incomes, and a demographic tailwind from a large young adult population coming of age, U.S. housing markets could show modest growth this year even with higher mortgage rates."
Freddie Mac makes home possible for millions of families and individuals by providing mortgage capital to lenders. Since our creation by Congress in 1970, we've made housing more accessible and affordable for homebuyers and renters in communities nationwide. We are building a better housing finance system for homebuyers, renters, lenders and taxpayers. Learn more at FreddieMac.com, Twitter @FreddieMac and Freddie Mac's blog FreddieMac.com/blog.
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