How Will Current Home Mortgage Interest Rates Affect the Housing Market ?

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Driven by the current low mortgage interest rates on homes, the housing market has been booming. Will the current mortgage home loan interest rates rise again any time soon? Will the housing market collapse? Well, no.

Past recent years turned out to be some of the best years for real estate and the housing market on record in large part due to mortgage interest rates. Current house sales of existing units were 5.8 percent higher in 2003 than they were in 2002, according to the National Association of Realtors. New construction sales set a record in 2003 also, rising 8.2 percent above the 2002 sales level. David Lereah, chief economist for the NAR, predicted that 2004 would be the third best year ever for housing. This is obviously great news. Apply for a loan or request quote now.

Mortgage interest rates on homes currently have helped fuel a strong housing market at a time when the economy has been trying to struggle through with recovery. Many people wonder what will happen when mortgage interest rates do rise. Will current home prices, which have enjoyed years of generous appreciation, drop? That is not expected to happen any time soon if at all.

The current home loan mortgage interest rates have increased in from the lows set in late spring and early summer. Even so, NAR predicted that the 30-year fixed-rate loan will average 6.7 percent in 2004. In reality, that never happened. We did hit about 6.25% very briefly. Though higher than the historic low, current interest mortgage home rates are still very low by historical standards. Many of us remember when anything under 10% was fantastic! The early '80s were a market of about 20%!! It was tough to be a real estate agent if you didn't understand "creative financing". Loan officers were dropping out of the business like flies.

No one knows for sure when the will rise to a level that will affect affordability and the strength of the housing market. However, it's expected that inflation will remain low for some time. NAR predicts that consumer price inflation will actually drop to 1.6 percent this year from a projected 2.4 percent last year. As long as inflation remains low, it's expected that the Federal Reserve will keep short-term interest low to keep from jeopardizing the economic recovery.

Housing will continue to be strong, according to the Oct. 3, 2003, issue of The Kiplinger Newsletter. Kiplinger projected the then current rates on home mortgage interest rising to 7 percent by December 2004. Obviously that never happened. In fact at Thanksgiving they were still at about 5.3% for Fannie Mae 30 year fixed. However, an increase in homes current interest rate mortgage loans is not expected to put a dent in housing demand until they reach 8 percent range. Kiplinger doesn't see a housing price bubble that's about to pop, as some naysayers have predicted. According to Kiplinger, a few housing markets are ripe for correction, including Boston, Chicago, Houston and Charlotte, N.C. In these areas, building and price gains are outpacing job and income growth. Nationally, house sales are expected to drop 5 percent this year, but prices will appreciate 4 percent. Kiplinger is generally bullish on housing, which "will remain an important foundation of personal wealth."

Homeownership has always been one of the greatest things an individual or family could do for themselves financially. As the stock market has had it's violent ups and downs, as the economy faced uncertainty and fluctuation, real estate has consistently proven to be a winner over the long haul. What ever the market, the dream and goal of owning your own castle will continue to drive the housing market.

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