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Housing

As Mortgage Rates Move Above 5%, A New Normal For Home Buyers

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By Douglas A. McIntyre Updated Published
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The housing market is already up against a number of barriers to recovery. High unemployment keeps millions of people out of the market for homes. Banks are wary to give mortgages to even the most creditworthy buyers. An ongoing increase in foreclosures has kept downward pressure on prices. That might help bring buyers into the market save for the fact that they are concerned that the new house that buy today will be worth less in a year.

Rates for fixed thirty-year mortgages climbed above 5% and may stay higher than that for the foreseeable future. The Fed is likely to end its program to buy mortgage-related securities. The FHA is tightening its lending standards as defaults on current loans weaken its balance sheet.

The most significant enemy to low mortgage rates by the federal government itself. It is in the capital markets raising record sums to cover a growing record national deficit. It is joined in those capital markets by other sovereign nations and corporations like Berkshire Hathaway (BRK.A) and Kraft (KFT) which are issuing debt to cover M&A transactions. These waves of borrowing will raise rates as the competition for money forces borrowers to pay higher interest rates.

The housing recovery has a new enemy. Potential buyers may not be willing to pay high mortgage rates.

Douglas A. McIntyre

Photo of Douglas A. McIntyre
About the Author Douglas A. McIntyre →

Douglas A. McIntyre is the co-founder, chief executive officer and editor in chief of 24/7 Wall St. and 24/7 Tempo. He has held these jobs since 2006.

McIntyre has written thousands of articles for 24/7 Wall St. He is an expert on corporate finance, the automotive industry, media companies and international finance. He has edited articles on national demographics, sports, personal income and travel.

His work has been quoted or mentioned in The New York Times, The Wall Street Journal, Los Angeles Times, The Washington Post, NBC News, Time, The New Yorker, HuffPost USA Today, Business Insider, Yahoo, AOL, MarketWatch, The Atlantic, Bloomberg, New York Post, Chicago Tribune, Forbes, The Guardian and many other major publications. McIntyre has been a guest on CNBC, the BBC and television and radio stations across the country.

A magna cum laude graduate of Harvard College, McIntyre also was president of The Harvard Advocate. Founded in 1866, the Advocate is the oldest college publication in the United States.

TheStreet.com, Comps.com and Edgar Online are some of the public companies for which McIntyre served on the board of directors. He was a Vicinity Corporation board member when the company was sold to Microsoft in 2002. He served on the audit committees of some of these companies.

McIntyre has been the CEO of FutureSource, a provider of trading terminals and news to commodities and futures traders. He was president of Switchboard, the online phone directory company. He served as chairman and CEO of On2 Technologies, the video compression company that provided video compression software for Adobe’s Flash. Google bought On2 in 2009.

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