The rising trend for mortgage rates isn't expected to abate anytime soon, but the housing recovery should be able to weather the storm.
That's according to Fannie Mae Chief Economist Doug Duncan, who's said the possibility that the Fed may begin to taper its bond buying program shouldn't scuttle the housing recovery.
“With regard to housing, all eyes now are turned toward the Federal Reserve, which is expected to begin scaling back its asset purchase program this week,” Duncan said. “Mortgage rates have increased more than 100 basis points since early May, and we anticipate that trend to continue, albeit gradually, during the next year. Despite the rise in mortgage rates, we expect the housing recovery to continue, with the mortgage market shifting away from refinance activity and more toward purchase activity. We project that purchase mortgage originations will account for more than half of total originations starting in the fourth quarter of 2013.”
The statement comes on the back of new research from Fannie Mae that paints a picture of uneven economic growth for the second quarter.
Growth in the second quarter, driven by higher exports and stronger inventory build-up than originally thought, was revised upward from a sub-2% to a 2.5% annual rate, according to Fannie’s Economic & Strategic Research Group. That upward revision, however, has neutralized some of the expected growth in Q3. Third-quarter growth could also be hampered by concerns over Federal Reserve policy and rising mortgage rates and oil prices, Fannie reported.
However, forecasters expect growth to pick up again in the fourth quarter, and Fannie’s full-year growth forecast of 2% remains stable.
“Incoming data for the current quarter paint a mixed picture, but overall we expect economic growth to slow from the surprising pace seen last quarter," Duncan said. “On the bright side, consumer spending appears to be improving from the tepid pace seen at the beginning of this quarter. Although Americans may continue to exercise caution, real consumer spending growth should improve modestly to slightly over 2% in the current quarter.”