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Higher Mortgage Rates Could Revitalize Smaller Home Sales

September 5, 2013

It's a billion-dollar question: Following a 30-year bull run in bonds and falling interest rates, can the housing market survive a rising-rate environment? Rising rates have a direct impact on housing affordability. Mortgages at a 5.5% annual rate are 12% more expensive than at a 4.5% rate. At 6.5%, monthly mortgage payments are nearly 25% more costly than at 4.5% As rates go up, the amount a buyer can afford to spend on a home goes down, all else equal. But will it put a damper on a real estate recovery?  We think not.  Of course, home buyers may have to forego the McMansions of the 1990's and invest in a quality built, feature-rich smaller home in a great location.  Read the full article by clicking here.  Then check out what is new at Grant & Company by clicking here.