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Home prices, mortgage rates soar

By Polyana da Costa · Bankrate.com
Tuesday, June 25, 2013
Posted: 3 pm ET

Home prices keep climbing, according to two home price indexes released today -- and so do mortgage rates.

Case-Shiller: Prices up more than 12 percent in a year

Home prices for the 20 cities included in the Standard & Poor's/Case-Shiller home price index increased 2.5 percent in April, compared to the previous month. Data through April 2013 show prices are up 12.1 percent from last year.

That's the largest year-over-year gain in seven years, says David M. Blitzer, chairman of the Index Committee at S&P Dow Jones Indices.

Prices in all 20 cities in the index were higher than a year ago. The biggest annual and monthly price gains were in San Francisco, where home prices jumped 23.9 percent from a year ago and 4.9 percent in April. Atlanta, Las Vegas and Phoenix also saw prices jump by more than 20 percent since last year, according to the index.

FHFA House Price index: Up 7.4 percent in a year

The Federal Housing Finance Agency index shows a more modest but still significant gain for home prices in April. According to the index -- which uses home sales price information from mortgage sold or guaranteed by Fannie Mae and Freddie Mac -- prices rose 0.7 percent on a seasonally adjusted basis from March, when homes prices increased 1.5 percent.

Prices jumped 7.4 percent in the 12 months ending in April, the index shows. The biggest gains were in the Pacific Census Division, which includes Hawaii, Alaska, Washington, Oregon and California.

Will rising rates damage the housing recovery?

Although the two indexes use different methods, the housing market recovery seems to be on the right track, no matter how you look at it.

At least, that was the case until last week, when Federal Reserve Chairman Ben Bernanke sent the markets on a wild ride during a news conference that followed the Fed's monetary policy meeting.

Mortgage rates have spiked since Bernanke told investors that the Fed will slow the pace of bond purchases this year and possibly end it mid-next year, as long as the economy continues to recover.

Will rising rates push some buyers out of the market and derail the housing recovery? Maybe that's what Bernanke is trying to figure out. Soon, he will have an answer.

Like the Fed, Blitzer seems optimistic and doesn't think higher rates will hurt the market.

"Homebuyers have survived rising mortgage rates in the past, often by shifting from fixed-rate to adjustable-rate loans," he says in a statement. "In the housing boom, bust and recovery banks' credit quality standards were more important than the level of mortgage rates. The most recent Fed Senior Loan Officer Opinion Survey shows that some banks are easing credit restrictions. Given this, the recovery should continue."

Easier credit, higher home prices, rising mortgage rates, bidding wars. Does that remind you of anything?

I would love to hear what homebuyers out there think about this. Would higher mortgage rates keep you from buying a home or make you look for a less expensive home?

Follow me on Twitter @Polyanad.

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12 Comments
david tonsfeldt
August 07, 2013 at 12:09 pm

The entire banking,stock market and housing market are manipulated the little guy is always the last to know what is going to happen and always suffers the most damage