After reaching multi-decade lows in mortgage interest rates, their inevitable rise was bound to hurt the U.S. housing market – or will it?
The 30-year fixed rate on mortgages hit cycle lows of 3.6% in September of 2017. Now they have hit 4.5% and are still trending upwards. There are obvious negatives for the overall health of the U.S. housing market in rates rising environment, but there’s good news too, according to Hedgeye Macro and Housing analyst Christian Drake.
“Your basic rule of thumb is a 100-basis point change in rates gives you a 10 percent reduction in affordability,” Drake explains in clip above. “But in the short term, sometimes when you see expedited increases in interest rates it actually pulls forward demand.”
In other words, homebuyers might make a purchase sooner than otherwise expected when interest rates start to climb, thinking they might miss out on lower rates.
So for now, the rise in rates isn’t necessarily bad. If it keeps going up, however…stay tuned.
Watch the full clip above for more.