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Mortgage Rates Aren’t Going Back Down: Fannie Mae Economist

Daily Ticker

In the latest gauge of rising rates, mortgage giant Freddie Mac reports rates for home financing are just shy of 4-percent this week, the highest since the week of April 12, 2012.

[Click here to check home loan rates in your area]

Related: Bill Gross: All Assets Are Risky, But I’m Buying Treasuries

What’s different this time around, according to Doug Duncan, chief economist at Fannie Mae (the other government-owned mortgage giant), is that mortgage rates aren't going back down. That’s one of the things he tells The Daily Ticker in the accompanying video.

While he doesn't see rates headed back down, Duncan says he does think the Fed will work hard to try to prevent rates from going further up from here and may try to hold them here through the end of the year.

Fannie Mae just released its mid-year economic outlook and sees a strengthening housing market pushing the economy forward at a lethargic 2.1 percent rate in 2013.

Related: “This Is Not a Normal Housing Market”: Economist Michelle Meyer

But they’re not using the word “robust” when it comes to housing’s move upward. Duncan says that’s because they don’t think housing gets back to normal as measured by factors like construction activity until 2016.

Related: Housing Recovery Faces Big Risk: Credit Expert

One interesting change Duncan says they’ve found through a survey Fannie Mae conducts is a jump in home sellers’ confidence. Forty percent now say it’s a good time to sell a home – a huge jump over last month and last year. This matters, according to Duncan, because five of eight people who are going to buy a house have to sell one first.

Tight housing supply has helped to fuel recent price gains in housing. One concern is that if people do start selling their homes, supply will increase and home price gains could slow down.

Duncan says this dynamic “will eventually slow the pace of price increase, but not until next year.”

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