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Higher interest rates may slow housing market recovery

What’s the biggest (and latest) threat to a recovery in the housing market? Probably rising interest rates, which have jumped up noticeably in the past couple of weeks.

At midweek, the rate on a 30-year fixed-rate mortgage had climbed to 5.79 percent, up from just 5 percent two weeks ago. That may not seem like a huge increase, but experts are saying that the increase is already having a dampening effect on refinances. Some say that the increase from 5 percent to 5.79 percent may mean that refinance applications are likely to be cut in half.

The major culprit seems to be interest rates on Treasury notes. The Federal Reserve is trying to combat the increasing interest rates by buying up Treasury notes. So far, however, that strategy doesn’t seem to be having much of an affect.

A few weeks ago, interest rates had fallen below 5 percent, which was the lowest level in more than 50 years. Those very low rates, along with low purchase prices, seemed to be providing enough momentum to get the sluggish housing market moving again. But higher interest rates could let the air out of that momentum.

Tags: Palm harbor real estate, Pinellas County real estate, rising interest rates