Mortgage Rates Rise on News of Increased Home Sales, Economic Health

By Kyle Chezum Updated on 1/20/2011

1/20/11

The National Association of Realtors reported a significant increase in existing home sales for the month of December 2010, inspiring cheers from every corner of the real estate and financial market.  Existing home sales surged 12.3% past November levels, with 5.28 million homes sold.  The news was unexpected and emerged alongside equally heartening news on the recent drop in jobless claims.  New unemployment benefit requests dropped by about 40,000 last week.  January saw a decrease in home purchase mortgage applications.

The December increase in home sales was likely tied to the sudden increase in mortgage rates that occurred around the end of the year.  Many hesitant buyers likely entered the market in a hurry out of fear that rates would leap even higher.  A $2,000 decrease in national median home prices may have been a deciding factor as well.

Interest rates on the 30 year fixed rate mortgage increased today, according to mortgage giant Freddie Mac.  The increase may have been tied to the news of December’s sales.  Freddie Mac reported a rate of 4.74% on these loans, up from 4.71% last week.

The number of distressed homes on the market increased during December to 36% from 33% in the previous month, information that puts a slight damper on the positive news.  But economists and industry insiders remain hopeful for the new year.  The encouraging December data may boost consumer confidence and motivate more buyers to enter the field.  Lawrence Yun, chief economist of the NAR, reported that rental prices are rising, a sign of good economic health that will likely push homebuyers to purchase.  Current mortgage rates are in a state of flux from week to week with a gradual upward trend expected over the course of the year.