Higher Mortgage Rates Take a “Bite”

Existing home sales came out today at the worst month over month drop in over a year. The mortgage industry  saw this coming and it was easy on our part. Mortgage applications have been falling like a rock since May due to mortgage higher rates. Unless you are buying for cash you need a mortgage to purchase a home.

The question is now can the economy overcome higher mortgage rates? If the economy is as strong as the administration says it is, then higher rates should not have effected home sales. But the fact is it did and in a huge way.

Yes the stock market has reached all-time highs and that’s good for Wall Street, but the stock market is not the economy. Main Street needs a vibrant economy for them to be able to overcome higher mortgage rates. You cannot have people making less and expect them to be able to afford a higher mortgage payment each month.

The bottom line don’t beleive Washington or this administration this economy is not strong or higher mortgage rates wouldn’t matter. Here are some great excerpts from our friends at ZeroHedge.com

Existing home sales dropped 1.2% month-over-month – the biggest drop in 2013 – against expectations for a 1.5% rise. Critically though, this is for a period that reflects closings with mortgage rates from the April/May period – before the spike in rates really accelerated. Inventory rose once again to 5.2 months of supply (vs 5.0 in May) and you know the realtors are starting to get concerned when even the ever-optimistic chief economist of the NAR is forced to admit that ‘stunningly’ “higher mortgage rates will
bite
.” With mortage applications having collapsed since May, we can only imagine the state of home sales (especially as we see all-cash buyers falling) for July.

NAR chief economist, said there is enough momentum in the market, even with higher interest rates.  “Affordability conditions remain favorable in most of the country, and we’re still dealing with a large pent-up demand,” he said.  “However, higher mortgage interest rates will bite into high-cost regions of California, Hawaii and the New York City metro area market.”

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