The speed and size of the mortgage rate increase took many lenders and borrowers by surprise. Since the election, interest rates rose about half a percentage point to a 16-month high. That jump is expected to reverberate across the housing industry, particularly if rates continue to rise next year. Wall Street already is expecting the Federal Reserve Bank to increase its benchmark interest rate when it meets in December.
Before the election, buyers were dragging their feet, but real estate agents, according to The New York Times, report a flurry of activity with more showings and contract signings since rates moved. While higher rates often are followed by a burst of activity, Ian Shepherdson, chief economist at Pantheon Macroeconomics, does not see any evidence of pent-up housing demand ready to be unleashed. Rather, he thinks housing activity will decline during the first quarter.
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