Linkage: are home sales immune to rising rates?
Kicking off today’s linkage with an excerpt from Inside Mortgage Finance on how sustainable the market is when it comes to rates rising:
As interest rates on mortgages continue to rise, refinance activity will take a hit but home sales wont decline by much, according to an analysis by First American.
Mark Fleming, chief economist at First American, ran a model with interest rates on 30-year fixed-rate mortgages increasing from the current 4.40 percent level to 9.00 percent.
Using our potential home sales model, the market potential for home sales declined from the current value of 6.1 million seasonally adjusted annualized rate to 5.8 million SAAR, he said. So, if mortgage rates doubled overnight, our model indicates a decline of just 300,000 sales, a mere 5 percent decrease.
Fleming said the scenario helps to put recent modest increases to interest rates into perspective. Given todays strong economy, our housing market is well positioned to adapt to rising mortgage rates, he said.