Last week Ken Fears, a leading housing economist predicted
that recent increases in mortgage interest rates will level off next year and
housing sales across the nation will remain strong. He said “We see prices
continuing to rise and we expect rates to be about 5.1 percent maybe up to 5.25
percent.”
Mortgage rates have increased more than 1 percentage point
since May, although Thursday, they dropped to 4.5 percent from last week’s 4.75
percent.
Meanwhile, sharply rising prices have pulled more homeowners
out from underwater on their mortgages — where homes are worth less than what’s
owed on them. That has led to declines in foreclosures and delinquencies,
reducing the inventory on banks’ balance sheets and lowering the potential for
a future wave of foreclosures.
Banks also have been more comfortable making loans to people
buying more expensive houses than cheaper ones, presumably because they have
stronger credit. Jumbo loans usually carry higher interest rates than
conforming loans, but that pattern was reversed recently, Fears noted.
Fears says the NAR expects prices to continue to rise.
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