In the most recent data released, housing starts show a mixture of economic results for the nation. Overall, the news of housing starts remains positive, but as mortgage rates begin to climb, the construction of new homes could be slowed, according to some experts. Others believe that if there is a demand for housing the construction will continue in spite of higher interest rates.
According to the Commerce Department, the number of permits to build homes rose 2.7 percent in July, which sets the pace of development at 943,000 homes each year. Economists were off in their predictions. According to Reuters, they had hoped for an annualized rate of 945,000 for the month of July. Some experts believe the higher mortgage rates acted as the restraint on the market while others beg to differ.
Mortgage rates have stayed low because the Federal Reserve has been purchasing $85 billion in bonds each month. However, that stimulus measure is expected to end soon, with the scaling down expected to start as soon as July. As the scale back begins and things return to “normal,” there will be higher interest rates, which in turn, many fear, higher mortgage payments will result in fewer housing starts.
However, others believe as the economy improves the mortgage rates will not impact housing construction that negatively but will just impact the refinance business. Some believe that the construction of new homes is simply because there is a shortage of residential properties. They believe if there is a need to build, construction will continue regardless of the higher rates.
The week kicked off with higher mortgage rates after seeing a spike last week. In the best execution scenario, for a 30-year fixed rate the average is 4.75 percent, which is a jump of .06 percent. The 15-year fixed rate increased .06 percent to land at 3.84 percent. The FHA 30-year note increased .07 percent to a rate of 4.41 percent. A .05 percent increase set the Jumbo 30-year note at 4.75 percent. Rounding out the group with a .02 percent increase is the 5/1ARM which sets at 3.30 percent.
Mortgage rates had hovered around the 4.5 percent range for significant amount of time before making the leap to the 4.75 percent range in recent days. Experts believe this is only the beginning and that rates will continue to climb. Many people will no longer be able to benefit from refinancing at this point, as they had locked in rates when they first dropped.
Disclaimer: The rates quoted above are basically the average advertised by a particular lending company. No guarantee of taken from the lender’ aspect whether the borrower will qualify for the mortgage rates mentioned in the article. The lenders dole out interest depending upon various facets, some of which may be unique to the borrower.
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