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Mortgage Applications Drop As Rates Spike

All things being equal, higher mortgage rates should depress demand. But "when it comes to mortgage rates, all else is never equal, " wrote Kolko.

For one thing, if rising interest rates are accompanied by a strengthening economy, then loan demand will remain high. Rising inventory could also increase home sales.

Another possible boost to home sales could come from a losening of mortgage credit standards as clarity on rules emerge and banks, no longer seeing easy money from refinancing, start competing for mortgage lending business.

"All told, the housing market and the economy have a lot of moving parts. Aside from the sharp and immediate effect that rising mortgage rates have on refinancing, the impact of rising rates on the housing recovery is hard to pinpoint," according to Kolko.

-- Written by Shanthi Bharatwaj in New York.

>Contact by Email.

Disclosure: TheStreet's editorial policy prohibits staff editors and reporters from holding positions in any individual stocks.
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