Mortgage Rates Jump Over 4%, Still Rising

Mortgage rates for some risky loans recently have moved above 4%. That level has now entered the mainstream. Many 30-year rates have popped over 4% and are rising. The Federal Reserve’s decision to raise rates can only fuel more increases. There is some question about whether this will threaten the housing recovery.

Chase, a large mortgage lender, has a 4.25% rate on a 30-year fixed, with one point, on a $215,000 sum. In a number of ZIP codes across the country, the competing rate is 4.375%, with 0.625 points on $200,000. These are reasonable proxies for the market. U.S. existing home media prices are just above $232,000.

According to Case Shiller, the housing recovery has hit an acceleration rate that pushed the market to a complete recovery from the bubble explosion in 2007 and 2008. Its National Index for September rose 5.5% on an annual basis, and it edged above the previous record set in July 2006. Even markets left for dead — Miami, Tampa, Phoenix and Las Vegas — have made price progress and had recovery rates above the national number in September. Year over year, improvements for the month were above 10% in Seattle and San Diego.

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Case Shiller economists said some of the improvement was due to disposable income. Some experts would add the jobs recovery.

However, even jobs and income cannot completely offset wary home buyers who have to measure their mortgage payments over three decades. And they have to assess that against a multiyear period when they could borrow at historically low rates.

So, the housing recovery has entered uncharted territory. Home prices are high and mortgage prices are rising. It is no perfect storm, but it is a strong one. Rates are above 4%, and there is no case they will drop back to their level in the period of cheap housing.

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