NEW YORK (TheStreet) -- Buying a home has become more expensive because of rising home prices and interest rates, but it appears it would take more to shake the housing recovery.
In Fannie Mae's June National Housing Survey, 72% of the respondents said it was still a good time to buy a home, even though the share of respondents who expected mortgage rates to increase in the next 12 months rose by 11 percentage points to 57%, the highest level in the survey's three-year history.
The share of respondents who believe home prices will go up in the next year also hit a survey high of 57%, underlining consumers' confidence in the housing recovery.
"Consumers may recognize that today's still favorable mortgage rates and homeownership affordability levels will recede over time," said Fannie Mae economist Doug Duncan. "Given rising home and rental price expectations and improving personal financial attitudes, more prospective homebuyers may be deciding that now is the time to get off the fence."Housing and mortgage analysts have also argued that the rise in interest rates, while denting affordability, is unlikely to deter the recovery. In fact, some have concluded that interest rates have only a limited impact on home prices. In a report released Sunday, KBW analysts look at past behavior of home prices in the U.S. and in the state of California during periods of rising interest rates, starting from the 1980s. Rising interest rates did not cause a drop in home prices as is commonly feared. In fact, the analysts found that historically rising home prices and rising interest rates went hand-in-hand. This was because "early in a recovery period for home prices, positive economic growth and increasing demand for housing offset rising financing costs," they wrote. Interest rates appeared to have a very small impact on home prices. For instance, between January 1993 and January 1995, interest rates moved from about 8% to a little over 9%. Home prices in the U.S. still rose, irrespective of the move in rates. In California, however, home prices declined, as the local economy was still climbing out of recession.
Select the service that is right for you!COMPARE ALL SERVICES
Jim Cramer and Stephanie Link actively manage a real portfolio and reveal their money management tactics while giving advanced notice before every trade.
- $2.5+ million portfolio
- Large-cap and dividend focus
- Intraday trade alerts from Cramer
- Weekly roundups
Access the tool that DOMINATES the Russell 2000 and the S&P 500.
- Buy, hold, or sell recommendations for over 4,300 stocks
- Unlimited research reports on your favorite stocks
- A custom stock screener
- Upgrade/downgrade alerts
Jim Cramer's protege, David Peltier, identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.
- Diversified model portfolio of dividend stocks
- Alerts when market news affect the portfolio
- Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
All of Real Money, plus 15 more of Wall Street's sharpest minds delivering actionable trading ideas, a comprehensive look at the market, and fundamental and technical analysis.
- Real Money + Doug Kass Plus 15 more Wall Street Pros
- Intraday commentary & news
- Ultra-actionable trading ideas
Our options trading pros provide daily market commentary and over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.
- 100+ monthly options trading ideas
- Actionable options commentary & news
- Real-time trading community
- Options TV