MortgageReal Estate

CNBC blog: What a rate hike means, and doesn’t mean, for housing

There are more important things to think about

How much would a rate hike affect the housing market? One blog by Diana Olick for CNBC attempts to answer that question.

At the conclusion of its last meeting, the Federal Open Market Committee announced it decided not to raise interest rates in September.

In fact, minutes from the June meeting show that the Fed may not raise interest rates until December or later.

But according to this blog, it doesn’t matter much either way, and housing has much bigger issues to be concerned with.

From the blog:

First, mortgage rates don't exactly follow the federal funds rate. They follow mortgage bond yields, and those yields loosely follow the yield on the U.S. 10-year Treasury.

So what would an increase in mortgage rates mean for consumers?

From the blog:

Last week they rose about an eighth of a percentage point on the commonly used 30-year fixed loan. So now it's around 3.75 percent. But let's keep it all in perspective. That's only about a half a percentage point higher than the all-time low. It's not changing your monthly payment by more than a few dollars.

TransUnion’s new study shows that if the Fed does raise interest rates, it could cause a payment shock for over 9 million consumers. And, that's not just for homeowners, but a wide swath of borrowers.

Whereas this may seem like a lot, a total of 92 million credit-active consumers would experience some kind of payment increase if the rates go up by 25 basis points, but the average increase would be only $6.45 per month.

So what are the bigger issues in housing?

From the blog:

Supply. Home inventory has been falling for over a year and is now near record lows. Supply is weakest where we need it most, which is in starter homes.

Existing home sales decreased yet again in August due to high home prices and low inventory locking some potential buyers out of the market, according to a report released by the National Association of Realtors.

3d rendering of a row of luxury townhouses along a street

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