Fannie Mae: Housing Recovery Stands Ground Despite Rate Jump

22 July 2013

According to Fannie Mae, the recent jump in mortgage rates would have little to no impact on home values.

The report was taken after comparing the trend in 1990 where researchers concluded that the increase in mortgage rates would less likely hurt home sales and the overall housing recovery.

The time analysis study compared two periods: October 1993 to 1994 when rates soared to 9.2 percent; and October 1998 to 2000 when the rates reached 8.5 percent from 6.7 percent. The researchers found that home values only fell slightly during the early 1990s and were virtually undamaged after rates spiked on late 1990s to 2000.

The study also incorporated the current economic trend. Due to the positive economic growth, high incomes were posted in various areas of the country. Increase in wage coupled with more jobs cultivates a healthy economic atmosphere which can easily translate to increased consumption and potentially more home purchases.

With more than 4.51 percent increase since early May, many experts are in the opinion that the impact on home prices can be left in the long run. For now, the rates are still historically low and homes remain affordable.

Concluding the report, experts are saying that the overall sales volume will not be affected. Due to the increase in mortgage rates, homebuyers are opting for more affordable homes, say a four-bedroom one rather than a five-bedroom detached property. This would only affect the median price for more affordable homes but the total sales will be less likely affected.