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On Tuesday, Zillow said the average 30-year fixed mortgage rate rose 50 basis points to 4.38 percent. Last week the rate averaged 3.88 percent.
That’s the highest rate since July 2011, but still far below historic averages.
Erin Lantz, director of Zillow Mortgage Marketplace, said rates spiked in the wake of Federal Reserve Chairman Ben Bernanke’s comments about the Fed’s commitment to scale back its stimulus program later this year.
“This coming week, we expect rates will be volatile as the market recalibrates and determines whether we’ve reached a new plateau near 4.5 percent or whether this week’s rate spike was an overreaction that warrants a downward adjustment,” said Lantz.
Blitzer said the housing recovery should continue even with mortgage rates rising.
“Home buyers have survived rising mortgage rates in the past,” Blitzer said, “often by shifting from fixed-rate to adjustable-rate loans.”
Blitzer said the bigger issue for the housing market is banks’ willingness to lend.
A recent survey by the Fed suggested that some banks are easing credit standards.
Tousley and other experts say price gains in the Twin Cities and beyond will moderate as the inventory increases.
“First, there are very few homes on the market for this time of year — about 13,000 versus up to 20,000 we see traditionally,” Tousley said.
“But rising prices will bring more homes for sale into the market, creating a better balance between supply and demand.”
The Associated Press contributed to this report.
Jim Buchta • 612-673-7376