The following article appeared in Mortgage Professional America on July 17th, 2013.
Some are saying that the sharp rise in mortgage interest rates in June, driven by bond market responses to the Fed, is leading to a bubbling housing market. But CoreLogic shares a more optimistic housing recovery outlook in its July MarketPulse Report.
CoreLogic Chief Economist Mark Fleming, Ph.D., and Deputy Chief Economist Sam Khater say the market is not experiencing a housing bubble. Instead, the recent rise in mortgage rates is helping to slow the pace of current appreciation, preventing another bubble.
“Rates would have to rise appreciably higher to cause a housing market downturn,” the economists wrote in the report.
Instead, housing affordability is near its height due to historically low interest rates and home prices.
Home prices were less affordable as pricing boomed in the middle of the decade. In fact, the affordability index reached a low point in June 2006 when prices reached their apex, meaning the national median-income family could no longer afford the national median-priced home. Despite recent increases in prices, all but two states are affordable today, and most states are near their recent affordability high points, according to the report.
“While the rational or irrational nature of buyers’ expectations is not clear in housing today, CoreLogic believes there is still a long way to go before housing again becomes unaffordable,” the economists said in the report. “Even with the most recent prices gains and interest rate hikes, CoreLogic still observes high levels of affordability by historic standards.”