Rising mortgage rates will help to temper the possibility of a bubble as well, but they will not cut into demand dramatically, as some have predicted, according to Fleming.
“Buyers buy based upon payment, and those payments are still highly affordable relative to their incomes,” he said. “Even with 100 basis point swing, there’s still plenty of room in that [affordability] index.”
The concern, however, has been that as mortgage rates rise, home prices would necessarily fall, as buyers lose purchasing power. That may not be the case, according to a new analysis.
(Read more: Map: Tracking the US real estate recovery)
“History shows that a rapid rise in interest rates tends to have little correlation with home prices. Rather, rising rates are more likely to contribute to a decrease in home purchase volume and an increase in the market share of adjustable-rate mortgages,” wrote Mark Palim in a Fannie Mae commentary.
Article source: http://www.cnbc.com/id/100890224