DO rates have anything to do with the health of the real estae market?

Sure... Rates go down, affordability improves, more people buy. Rates go up, affordability declines, less people buy homes. But people will always buy homes, and a slight rate increase will only have a slight effect on the number of homes selling. I bought my first house in 1981 and paid 16% for my FHA 30-year fixed mortgage. The only reasons the rates have been so low the last few years is the government has been playing games to make it that way (buying mortgage backed securities) to stimulate the economy. It has been working, and the government feels it no longer needs to stimulate the economy. Rates are increasing now because the government has indicated it is going to stop playing in the market (buying $85 billion a month of mortgage backed securities). So, as the market improves, rates are going to eventually land where they should be on their own. Right now that is projected to be about 5.5% by the middle of next year.

It can, if rates go up, obviously the cost of money borrowed goes up and thus more expensive to buy. If wages increase at a better clip than rates do then it won't have as great effect on the real estate market. My personal opinion is that wages are not moving up as quickly as rates but we shall see.

I look at it like gas prices. Remember when gas prices started with the number 2? Then it jumped up to 3 very quickly and now hovers around 4. People now think they are getting a good deal at $3.50. Lesson is that people will adjust and get used to the "higher" rates and simply purchase less expensive homes.

No, historically if the housing market is doing well, and the economy is doing well overall, rates will go up.

Larry said it best. When rates first rise, it may deter a few people from buying but people adjust, just like gas prices. People will always buy homes just as they will always buy gas. On the other hand, the reason rates are increasing is because of the improving health of the housing market as well as the economy as a whole.

Rates don't have anything to do with the health of the real estate market directly, but rates do affect how real estate market moves. With lower rates it opens up more opportunities for more buyers to qualify for homes but when rates go up, like they have in the last couple weeks, then home buyers qualify for less of a home for purchases and may not qualify at all. With less buyers, means less chances for a home to be sold.

no

Mortgage interest rates have been rising on signs that the U.S. economy is improving. Last week, the 30-year fixed rate reached the highest level in more than six months, climbing to an average of 3.63%, compared with 3.52% the previous week and 3.92% a year earlier. The current rate is the highest it's been since the week of Aug. 23 when the 30-year fixed rate averaged 3.63%, according to Freddie Mac. Rates have an affect on how the market moves.

to answer your question...Hesam....NO....rates will not go down if the real estate market improves....Actually it is the opposite....They historically go up....they are not directly tied to the real estate market..but the economy tends to be their driving force....as the real estate market improves....so does the economy...and jobs....and the Fed who have been artificially keeping rartes down by QE 1,2, and 3 will most likely start to ease off their purchases of MBS and therefore like we have seen MBS and rates will most likely continue to go up....