National housing prices just posted their best year-over-year performance since 2006. Does that mean the housing market has fully recovered? If so, could it mean that today's low mortgage rates may soon be a thing of the past?
According to the Standard and Poors/Case-Shiller Home Price Indices, national home prices rose by 10.2 percent over the 12 months that ended with the first quarter of 2013. That's their best performance since the housing boom. Furthermore, it continues a string of positive performances for housing, and comes amid a run of generally favorable economic news.
Despite all those good signs, it may be too soon to declare the housing market fully recovered. Home prices may have to fight against a couple of headwinds in the months ahead.
Will mortgage rates rise?
Housing prices are not the only thing that has been headed higher lately. Mortgage rates have also been on the rise.At 3.81 percent, according to yesterday's Freddie Mac mortgage survey, current mortgage rates are nearly half of a percentage point above their low point for 2013. If the economy and the housing market continue to improve, mortgage rates may climb even further. Here are three reasons why mortgage rates may follow housing prices upward:
- Stronger housing and economic growth may bring greater loan demand.
- The Federal Reserve may ease its low-interest-rate policies in response to a strengthening economy.
- Spending growth may bring a little inflation.