Rising Mortgage Rates May Boost Home Sales

By Kyle Chezum Updated on 12/13/2010

12/13/2010

Mortgage rates are rising, despite the Fed’s recent attempts to keep them low by purchasing $600 billion in Treasury bonds, and home sales are likely to increase in the short term as a result.  As more and more potential homebuyers see rates increase, those currently on the fence will move ahead and buy.  This will spark resurgence in the housing market in the short term, but economists fear that high rates will lead to further instability in the long run.

The reason for the high rates is tied to Obama’s recent tax cuts that have added nearly $900 billion to the national debt.  As debt increases, risk increases as well, which has driven the value of Treasury bonds downward in spite of the Fed’s efforts to increase value by purchasing vast quantities of the bonds.  Time will tell whether the short term benefits will create lasting consumer confidence in the housing market.

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